Question 1

What is Indexed Universal Life (IUL)?

Accepted Answer

Indexed universal life insurance is a type of permanent life insurance that has a cash value component in addition to a death benefit. The money in your cash value account can earn interest based on a stock market index chosen by the insurance company, such as the S&P 500.

Question 2

How Does Indexed Universal Life (IUL) Insurance Work?

Accepted Answer

When a premium is paid, a portion of the premium pays for the cost of insurance, and the difference goes into the cash value account. Based on how the stock market index performs, the cash value can be credited   5-10% interest annually. Note: your money is not invested directly in the market, so you never lose what you have accumulate in your cash value when the market goes down.

Question 3

How much can I start with?

Accepted Answer

Below is our recommendation:
20yrs - 25 yrs: $150 - $200
26yrs - 30 yrs: $200 - $250
31yrs - 35 yrs: $250 - $300
36yrs - 40 yrs: $300 - $350
41yrs - 45 yrs: $400 - $450
46yrs - 50 yrs: $500 - $550
50yrs- 60yrs: $550 - $1000 or more

Question 4

What are the advantages of IUL?

Accepted Answer

There are many advantages to having an IUL policy:
Less risk: The cash value is not directly invested in the stock market, thus reducing risk to zero.
Interest rate ranges from 5 -10% annually (Depending on the indexed performance)
Tax-free- You don’t pay taxes on interest earned
Easy distribution: The cash value in IUL policies can be accessed at any time without penalty, regardless of a person’s age. 
Retirement Supplement: When structured and funded properly, it can be used as a tax-free retirement income
Access death benefit: You can access 80-100% of the death benefit if you become critically, terminally, or chronically ill.
Death benefit: This benefit is permanent, not subject to income or death taxes, and not required to go through probate.
Unlimited contribution: IUL insurance policies have no limitations on annual contributions. This means you can put extra money in the cash value and earn interest on it.

Question 5

What is the age range to qualify for an IUL?

Accepted Answer

Anyone from 15 days old and above can qualify for an IUL.

Question 6

Do I need a medical exam before I get approved?

Accepted Answer

Generally, IUL policies does not require medical exams. However, during the application process, you will need to give HIPPA consent to the insurance company to access your medical record to make sure that you do not have any major health issues. In some cases, medical exam may be required based on medical history.
Also, if you applying for a death benefit of more than $1 million, a medical exam might be required.

Question 7

What are some of the reasons  why people get declined for an IUL?

Accepted Answer

Below are some of the reasons why a person can get denied for IUL:
A felony within 5-10 years
DWI or DUI within 5 years
Overweight (Depends on height)
Personal history of cancer
History of alcohol or substance abuse
Life, health, or disability insurance that has been rated or declined
Major medical conditions
Alcohol Abuse

Question 8

Do I have to pay taxes on the interest earned on my cash value?

Accepted Answer

No, you do not pay taxes on funds accessed from the policy as a loan, and the policy remains enforced. If you decide to cancel the policy, you will be required to pay taxes on any "interest earned'' in your cash value.

Question 9

Can I increase my monthly premium anytime?

Accepted Answer

Yes, you are allowed to increase your premium up to a certain amount annually depending on how your policy is structured.

Question 10

Is IUL better than 401k or IRA?

Accepted Answer

401k and IRA are both considered investments, while IUL is not. However, IUL does offer several benefits, which are not available with both 401k and IRA. (i.e. protection from market volatility.
For example, you can fund the policy with as much as you want, there are no age restrictions on withdrawals, you do not have to pay taxes on the interest earned, it's not impacted by market losses, etc.

Question 11

What is the difference between an IUL and Whole Life Policy?

Accepted Answer

IUL's cash value growth is based on the stock market index performance; as a result, there is a higher probability of receiving a higher interest rate up to 10% or more. On the other hand, Whole Life cash value growth is based on the company's performance, so the maximum interest rate is often capped at around 5%.

Question 12

How soon can I access the funds in my cash value?

Accepted Answer

Generally, it takes 5-10 years for you to accumulate enough funds to withdraw, and the minimum you can withdraw is $500. However, you can access funds in your cash value after 12 months "IF" you put in a lump sum.

Question 13

What happens to my cash value when I pass way?

Accepted Answer

The cash value is added to the death benefit and paid out to your beneficiary. For example, if you pass away and you have $50,000 in cash value and $300,000 in death benefit, your beneficiary will receive a total of $350,000.

Question 14

Can I fund the policy with large sums of money at once?

Accepted Answer

Yes, but it depends on how much your death benefit is. A high death benefit gives you the ability to overfund the policy with more money, which then enables your cash value to grow much faster.

Question 15

How do I access money from my cash value?

Accepted Answer

You can either withdraw the cash value, which will reduce or deplete what you have accumulated, or you can take out a loan against the cash value.
It is more beneficial to take out a loan. When the insurance company gives a loan, they are not necessarily taking it from your money. Your money is being held as collateral against the loan, which means you are earning uninterrupted compound interest.
If you pass away in the process of paying back your loan, the loan balance will be deducted from your cash value, and whatever is left will be paid out to your beneficiary.

Question 16

What happens if the insurance company shutdown of files for bankruptcy?

Accepted Answer

When an insurance company becomes financially unstable and can’t pay policyholder claims, the state’s insurance commissioner can take over the company through a process called receivership. First, the commissioner will try to rehabilitate the company to improve its financial situation. If that doesn’t work, the commissioner can declare the company insolvent and sell off its assets, according to the National Organisation of Life & Health Insurance Guaranty Associations.
If an insurance company is declared insolvent, the state guaranty association and guaranty fund swing into action. The association will transfer the insurer’s policies to another insurance company or continue providing coverage itself for policyholders.

Question 17

Where can I get an IUL policy?

Accepted Answer

You can only get an IUL through a licensed insurance agent who is appointed with specific carriers that offer IUL. Our agents are licensed nationwide with several carriers that offer IUL.

How Indexed Universal Life Works

Frequently Asked Questions