Index Universal Life

Indexed universal life insurance (IUL) is one of the more innovative wealth-building options available today. First and foremost, it provides a death benefit like all life insurance policies. The difference is that this one also provides a build-up of cash inside the policy. This cash is not exposed to market risk, can be accessed tax-free, and is liquid.

You do not have to wait until you are age 59.5+ to use this cash without penalties and taxes…unlike your 401(k). It’s an extremely versatile asset that provides a lot more than most life insurance policies.

Read on to learn the details and why you may want to include this in your portfolio.

What is Indexed Universal Life Insurance?

Indexed universal life is a permanent life insurance policy with a unique cash value accumulation structure. The policy lasts for your entire lifetime, unlike term. However, many people take advantage of it for the cash value growth benefits, in addition to the death benefit.

With the recent volatility in the stock market, clients are looking at alternative places to grow their money without risk.

The retirement vehicle of choice for many is the 401(k). However, a 401(k) has market risk, postpones taxes to the future, and does not allow you to use your own money without penalties and taxes until you are age 59.5. It’s not the ideal retirement solution.

Why Do You Want Life Insurance as Part of Your Portfolio?

Most people who look into IUL policies will use them as part of their retirement strategy. Tax-free loans from the policy make this particularly attractive if you expect tax rates to increase in the future. If you do not pay the loan back – no problem. The loan is paid back by being subtracted from the death benefit when you pass.

Some people looking into an indexed universal life policy use it as a supplemental wealth-building tool to their more traditional investments. There are no age restrictions on loans, unlike a 401(k) and IRA, so it allows for a more liquid wealth-building tool.