Are you looking for a future investment that will pay off? Yes, you are. What role does indexed universal life (IUL) insurance play in this scenario? How?
Continue reading to learn more about indexed universal life and the best strategy to meet your life insurance needs.
The Basics of IUL Investments
What Exactly Happens With an IUL Premium? you might be thinking. A good query! Remember those terrible costs first. Hey, insurance providers must find a way to support themselves. The early stages of the policy’s life can be particularly taxing for those fees.
The price of your actual death benefit is next. Whatever is left over after those two expenses are paid for goes into a cash value account. The index enters the picture at this point.
If you’re unfamiliar, an index is simply a list of corporations that investors use to assess how the stock market (or occasionally a specific segment of the market) is performing. Indexes include things like the S&P 500 and the Dow Jones Industrial Average.
Depending on your policy, the cash value may correlate with an index’s performance. So, for instance, if an IUL tracks the S&P 500, the insurance provider will determine the interest rate to be paid on the cash value portion of your policy based on the performance of the S&P 500. Interest is sometimes paid annually and other times according to different schedules. Your cash value is expected to increase thanks to the interest; but, whether this will actually happen is another matter.
Sounds really good, huh? It could appear safe to invest in that element that is related to an index.
An IUL Account: What Is It?
Indexed universal life accounts, which are also a hot mess, are life insurance policies where a portion of your money is linked to a stock market index (more on what those are down below). Two benefits are covered by an IUL’s premiums:
A death benefit is a monetary payment made to your family (or estate) in the event of the unthinkable.
An account with cash value: This might increase in value according on the success of a chosen stock market index because it is invested in an index fund (hence the name “indexed universal life”). But any profits you could receive from the cash value element of your policy could be severely reduced by high costs.
