Indexed universal life (IUL) policies are a type of permanent life insurance that helps policyholders build their wealth, while also providing a death benefit for their loved ones. When the policyholder pays their premium, a portion of the payment goes toward the policy, while the other portion is added to the policy’s cash value.
Before deciding that an IUL is the right choice for you, it’s important to understand how these policies work.
IULs are permanent policies, meaning they will last for your entire life as long as you continue to pay the premiums. These policies will include a death benefit, which will be paid out to your beneficiary when you pass away.
There is a cash value component that can be accessed by only you, the policyholder, while you’re still alive. This cash value can increase in value over time, earning interest based on the performance of a stock market index, such as the S&P 500. When the index moves up or down, so does the cash value.
You have the option to borrow against the cash value, which can be a great benefit when its needed. However, any loans left unpaid when you die will be deducted from your policy’s death benefit.
Whether an IUL is right for you will ultimately depend on your specific needs. However, there are some pros and cons to consider.
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