A Guide To Index Universal Life Insurance.

Shawn Plummer

CEO, The Annuity Expert

What is Index Universal Life Insurance?

Indexed universal life insurance is a type of permanent life insurance. It lasts your whole life as long as you pay the premiums. Other types of permanent life insurance are whole life, variable and universal.

Some life insurance policies are split into two parts:

  • A death benefit that pays money to someone when you die.
  • Cash value that can grow over time.

With Universal Life insurance policies, you can change the amount of money paid out when you die and use any gains from your cash value to pay for your premium.

What makes Index Universal Life Insurance unique?

Indexed life insurance (IUL) is different from other life insurance in that the interest rates can change. They are not set but instead based on an index chosen by the insurance company. Interest is earned based on the performance of that index.

What’s an index?

An index is a group of investments like stocks or bonds. The S&P 500 and the Nasdaq 100 are examples of indexes. The insurance company doesn’t invest in the market but uses an index to set the interest rate for your policy.

Cash Value

Index universal life insurance has a cash value that you can use. You get to decide how you want to use it. There is a chance that you can make a lot of money with an indexed universal life insurance policy. But you need to track the performance of the cash value and if it is possible to access those funds. You can buy a traditional life insurance policy instead of an IUL. This way, you have extra money to invest in other things.

Index Universal Life Insurance Pros and Cons


Most people don’t need life insurance for their whole life. But some people might need it to pay off debts, and some people might want to pass on the family’s wealth without paying taxes. Permanent policies can be good. If you have enough money, an IUL policy can help you do these things too.

You can grow your cash value more quickly if you buy an IUL, and the amount of risk is less. If the market falls, you won’t lose money. You can also change how much death benefit coverage you want when needed.


There are many different kinds of life insurance. IUL is one type. It is more expensive and harder to understand than other types of life insurance. Why? The index and cash value are complicated, so you need to be careful when choosing an IUL policy.

Your cash value may come with fees and these can increase. You will have restrictions on how much you can withdraw and there will be taxes if you take out more than what you put in.

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Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

The Annuity Expert is an online insurance agency servicing consumers across the United States. My goal is to help you take the guesswork out of retirement planning or find the best insurance coverage at the cheapest rates for you. 

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