Indexed Universal Life Insurance (IUL) is a permanent life insurance policy that provides a death benefit and is also an excellent savings vehicle for accumulating cash.
The cash accumulates on a tax-deferred basis and it can be accessed at any time and for any purpose in a tax-free manner.
An IUL does not have the same restrictions and rules that govern qualified plans such as 401(k)s, Roth’s and SEP’s. See the numbers behind an IUL compared to a 401(k).
You can access this money at any age without penalties and taxes.
Unlike a 401(k) or IRA, there is no limit to how much can be saved into an IUL.
If you are maxing out your qualified plan or just saving enough to get the company match, then an IUL is a perfect vehicle to save additional money for the future.
There is also no stock market risk to challenge the growth inside an IUL. Can you imagine the difference in your finances when there are no 40% market drops to make up?
Interest is credited to an IUL based on an external index such as the S&P, Nasdaq, or Dow Jones.
Each insurance company offers a selection of several indices to choose from (U.S. and Global) and you can change your index selections every year. This will vary by policy.
If the index is positive for the year, then your policy will be credited with the interest; sometimes up to a cap.
In the index is negative, your policy is protected with a guaranteed minimum interest rate (typically 0 to 2%) for the year.
This is how you can participate in the upside of the market with no downside risk.
The insurance company is able to offer this potential without the risk by using hedges and options. We can walk you through this strategy and explain exactly how they do it if you are interested.
There is no perfect financial product, but an IUL offers a combination of advantages that are simply not available in any single financial vehicle.
Most of the “negatives” can be overcome by just paying attention to your cash value in the policy and speaking with a knowledgeable insurance advisor or the insurance company when making decisions regarding your policy.
An IUL is a life insurance policy so you must qualify – healthwise and financially – to be approved for your policy.
If you have health issues, you can use another person (spouse, child, business partner, etc) to be the insured, as long as, there is an insurable interest. As the owner, you would still control money going in and out of the policy.
If the policy lapses or is surrendered, the income you took out of the policy may become taxable.
Options to circumvent this issue include, flexibility in paying the premiums and reducing the death benefit. Most insurance companies also offer a rider to help protect the owner from withdrawing too much tax-free income from the policy.
The expenses may be higher than other vehicles in the initial years of the policy.
However, over the life of the policy, the expenses in the IUL can be much lower than other savings vehicles like a 401(k) or IRA and your IUL does include life insurance.
It would take a combination of several other vehicles to equal the benefits and features found in indexed universal life insurance. Here is a list of the major benefits:
Most people think of life insurance for the death benefit only and do not know that there is a type of life insurance that can provide incredible living benefits and tax advantages. If you are looking for a savings vehicle that can help build wealth with no taxes and no market risk, then an IUL may be the right vehicle for you.
To see an illustration of an indexed universal life insurance policy, call or email us with the specifics of your situation, including:
We will then email an illustration to you and will review and answer questions over the phone and/or with a screen-share of our computer.
At Abrams Insurance Solutions, we educate our clients on how to grow their money with no additional risk and no negative impact on their lifestyle. To learn more, please visit https://abramsinc.com/build-wealth/.