Policy Types

Indexed Universal Life (IUL)

The different categories and structures of life insurance products.

Definition

What Is Indexed Universal Life (IUL)?

Indexed universal life (IUL) is a type of permanent life insurance that provides a flexible death benefit and accumulates cash value based on the performance of an external market index — such as the S&P 500 — subject to a floor and cap. The floor (typically 0%) protects against index losses, ensuring the cash value never decreases due to negative index performance (though policy fees and cost-of-insurance charges are still deducted). The cap rate (typically 8–12%) limits the maximum credited interest in any given period. IUL policies offer flexible premiums and the potential for tax-advantaged growth, but carry complexity and risk if underfunded. Policy fees must always be considered alongside the floor and cap.

Nevada Context

IUL is one of the most commonly discussed products among agents in our network serving Nevada clients. Nevada consumers should review illustrated values at multiple crediting rate scenarios and ensure illustrations conform to state regulations.

How It Affects You

IUL can offer meaningful tax-advantaged growth potential without direct market exposure. However, cap rates, policy fees, and rising cost-of-insurance charges over time must be carefully modeled. Guarantees are backed by the financial strength and claims-paying ability of the issuing insurance carrier.

Real-World Example