Types of Permanent Life Insurance: What Is Indexed Universal Life?

Did you know that life insurance is already a $44.7 billion industry? Yes, you read that right!

But what is a death benefit, anyway?

If you’re interested in indexed universal life insurance, then we’ve got the perfect guide for you. Take a look at a few different types of permanent life insurance below!

Intro to Indexed Universal Life Insurance

Want to stop asking yourself: Is indexed universal life insurance right for me?

To put it simply, there are a wide variety of universal life insurance plans to choose from, including variable and fixed-rate models. One thing that they all have in common, though, is that you will choose equity or fixed accounts to deposit your cash into no matter what.

Some of the most popular indexes to invest in include everything from the Nasdaq-100 to the S&P 500.

That being said, indexed universal life insurance policies may be a bit more unpredictable than fixed universal life insurance policies. On the flip side, however, indexed universal life insurance policies aren’t as risky as variable universal life insurance policies.

Besides this, indexed universal life insurance policies allow you to collect “tax-deferred” cash for your retirement years while giving you death benefits too.

This is a great option for:

Business owners
Premium financing plans
Estate-planning vehicles

But how do indexed universal life insurance policies work, exactly?

How Indexed Universal Life Insurance Works

Here’s how it works: Once you’ve paid your first indexed universal life insurance premium, part of your payment will go towards your new policy. In addition to this, some of your premium is used to pay any fees that you may have while the rest will be added to your overall “cash value.”

Besides, your total cash value gains interest that is based on how much its equity index has increased. However, keep in mind that these funds are not directly deposited into the volatile stock market.

Typically, those who hold index universal life insurance policies can choose from several different indexes. In fact, you may even be able to receive a “guaranteed minimum fixed interest rate” too.

After this, your selected index value is recorded at the start of the month and compared again at the end of the month. If you see an increase, your cash value will gain additional interest. Plus, the interest that you gain will be credited back to your original policy on an annual or monthly basis.

These gains lead to what’s known as participation rates. Participation rates are percentages set by your insurer that range anywhere from 25% to over 100%. Usually, your cash accumulation will gain interest every one to five years!