Are you interested in getting an indexed universal life insurance policy (IUL), but want to know more about it? Here are questions you likely have about this life insurance product that can also act as an investment.
What Exactly Is an Indexed Universal Life Insurance Policy?
An IUL policy is also known as a cash value form of life insurance, and it also provides a death benefit to family members. What it means to have a cash value policy is that the policy will increase in value as you continue to pay your premiums over the years, and you can access that money during your lifetime by taking withdrawals.
What makes an IUL policy unique from other forms of investments is that there are minimum and maximum caps for how much your investment can grow, which protects the insurance provider and the policyholder. Many investments are tied to the performance of stock market indexes, like the S&P 500 , which can go up or down over your lifetime. However, the caps of an IUL policy means that you don't have to worry about losses, since there is a guaranteed minimum that your investment will grow.
Can You Pick How Your Money Grows?
Every time you pay a premium to an IUL policy, the insurance provider takes a small fee known as a premium load. The net amount of your premium is then put into a fixed account where it can earn interest by just sitting there. However, you have the option to move it to an indexed account.
If you move your money to an indexed account, a term will start where your money will be invested. If the stock index you invested in is higher at the end of the term than what it was at the beginning, your investment will increase up to the cap. If the index loses money, you're protected by the minimum cap as well.
How Do You Access Your Investment Money Early?
Money that you have in your IUL policy can be withdrawn early as a loan or a surrender. Loans need to be repaid, and there is often an interest rate associated with doing so. However, you'll retain your full death benefit as well by using a loan. You can also withdraw money as a surrender. In this situation, you reduce the policy's value and your death benefit, but the money doesn't need to be repaid. However, there can be fees associated with doing so, and any money withdrawn above the premiums you've paid into the policy can be taxable.
If you have any questions about IUL, contact a company like Guillory Insurance for more information.
Share16 December 2021
