Indexed Universal Life (IUL) insurance is a permanent life insurance policy whose cash value growth is linked to a market index such as the S&P 500. Unlike direct market investments, IUL offers a 0% floor that protects your principal from market losses while allowing you to participate in market upside up to a defined cap. Properly structured, an IUL provides tax-deferred accumulation, tax-free policy loans for retirement income, and a tax-free death benefit for your heirs.
Indexed Universal Life Insurance: Tax-Advantaged Growth with Downside Protection
Build cash value tied to market index performance with a 0% floor that protects against losses. IUL combines life insurance protection with tax-free retirement income potential.
Frequently Asked Questions
What is the difference between IUL and a 401(k)?
A 401(k) offers tax-deferred growth but withdrawals are taxed as ordinary income and subject to RMDs at age 73. An IUL offers tax-free policy loans, no RMDs, no contribution limits, and a tax-free death benefit, in addition to downside protection through its 0% floor.
Can I lose money in an IUL?
Your cash value cannot lose money due to market downturns thanks to the 0% floor. However, policy fees, cost of insurance, and underperformance vs. cap rates can erode value if the policy is not properly funded.
How much can I contribute to an IUL?
Unlike qualified retirement plans, IULs have no IRS contribution limits. The maximum is set by your policy structure under IRS guidelines (TEFRA/DEFRA/TAMRA) to maintain tax-advantaged status.
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