Permanent Life & Indexed Universal Life (IUL)
Permanent life insurance is designed to last your entire life and typically builds cash value over time. Indexed Universal Life (IUL) is one type of permanent insurance whose cash-value growth is linked to a market index, with both potential for growth and important trade-offs to understand.
What it is
Permanent policies combine a death benefit with a cash-value component that can grow on a tax-advantaged basis. IUL credits interest based on the performance of a market index (such as the S&P 500), subject to caps and floors, rather than direct investment in the market.
Who it may fit
People with longer-term planning horizons and a need for lifelong coverage, those interested in a cash-value component as part of broader planning, and higher-income households considering tax-advantaged accumulation. These policies are more complex than term and require ongoing management.
Key considerations
IUL cash value is tied to an index but is not an investment in the market; returns are limited by caps and floors. Policy loans and withdrawals can affect the death benefit and may create tax consequences. Maintaining the policy usually requires sufficient premium; underfunding can cause the policy to lapse. Guarantees depend on the issuing insurer.
What to discuss with a licensed professional
How caps, floors, and participation rates work, how often premiums are needed, the risks of policy lapse, and whether the cash-value features suit your long-term goals and risk tolerance. Ask for a written illustration of projected values under several scenarios.
This is educational information, not a recommendation of any specific product or carrier. A licensed insurance professional can help you evaluate what fits your goals and circumstances. Availability varies by state.