What Is IUL Insurance?
Indexed Universal Life (IUL) is a type of permanent life insurance that builds cash value based on the performance of a stock market index (like the S&P 500), while providing a death benefit. Unlike variable life insurance, IUL offers downside protection through a guaranteed floor (typically 0-1%) and caps upside potential with a cap rate.
• Premium paid → Insurance costs deducted → Remainder added to cash value
• Cash value earns interest based on index performance
• Floor rate protects against losses (typically 0-1%)
• Cap rate limits maximum annual gain (typically 8-12%)
• Cash value grows tax-deferred
Pros and Cons
Pros: Tax-deferred growth, downside protection via floor, access to cash value through loans, permanent death benefit, flexibility in premium payments.
Cons: Cap limits upside, complex fee structure, cost of insurance increases with age, returns may lag direct index investment, policy can lapse if underfunded.
How to Use
Enter your annual premium, expected index rate, cap rate, floor rate, and cost of insurance. The calculator projects cash value growth over time.
Important Considerations
IUL illustrations often use optimistic assumptions. Actual returns may be lower due to caps, participation rates, and increasing insurance costs as you age. Always compare multiple scenarios.
Tax Benefits
IUL cash value grows tax-deferred. Policy loans are generally tax-free if the policy remains in force. Death benefits are income-tax-free to beneficiaries under most circumstances.
Disclaimer
This calculator provides simplified projections. Actual IUL policy performance depends on many factors including insurance costs, index performance, cap rates, and participation rates that change over time.