Financial Life Solutions
At its core, an IUL policy allows for flexible investments and the potential to allocate cash to an index-based option for increased growth linked to a popular stock index. However, it's important to note that the cash account growth is capped typically at between 10% to 12% per year. But in return, policyholders get a zero floor meaning they benefit from no capital losses from stock market falls.
An indexed universal life policy also features a minimum guaranteed interest rate which serves to protect the investment. Most IULs come with a fixed declared cumulative guarantee guaranteed minimum interest rate of 2% to 3% per year. This is in addition to the index-linked investment. This means that even if the stock market your indexed account is tracking consistently returns negative or no growth, your IUL surrender value will be credited with this cumulative guaranteed minimum interest rate anyway.
The policy includes a savings component which gives policyholders the opportunity to accumulate cash value over time. This provides them with a chance to save for future lifetime needs like retirement.
The potential for cash value growth is a major advantage of IUL insurance. Unlike other types of life insurance policies that offer fixed interest rates on cash value accounts, IUL allows the chance of higher returns by linking the same cash account value growth to the performance of a financial index, such as the S&P 500.
This means that the better the index performs, the higher your participation rate and your cash value growth can be, providing you with an additional source of income during retirement or for other financial needs. You can build a financial safety net while also protecting your loved ones or your business partners.
IUL policies provide substantial tax advantages, making them an attractive option for those seeking to minimise their tax burden. The growth of the cash value within an IUL policy is tax-free, meaning you won't have to pay taxes on the gains until you withdraw the funds.
Additionally, policy loans and withdrawals of the policy's cash value are typically tax-free, allowing you to access your funds without incurring additional tax liabilities. Finally, the death benefit is tax-free.