Index Unviversal Life (IUL)

Growth Potential With a Floor. Flexible Protection for Life.

Indexed universal life provides permanent coverage and a way to credit interest linked to external market indexes. The policy does not invest directly in the index. Credited interest is subject to a floor that helps limit negative credits and to carrier terms such as caps, participation rates, or spreads.

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How Indexed Interest Is Credited

Premiums support insurance costs and policy expenses. The remainder goes towards building the policy’s cash value. You can allocate cash value among a fixed account and one or more index accounts. At the end of each crediting period the carrier applies the contract terms to determine the interest credit.

Floor

Minimum credited rate for the period. Many designs use a 0% floor.

Cap

A cap limits the upside for the period. A participation rate credits a percentage of the index change. Some designs use both.

Spread or Asset Fee

A stated amount or percentage that is subtracted before interest is credited.

Crediting Methods

Annual point-to-point

Monthly sum or average

Two-year or multi-year strategies

Performance triggers and fixed-plus-bonus designs

Core Benefits

Flexible Premiums

Adjust funding within carrier limits to fit cash flow and goals.

Downside Floor

A floor helps reduce the impact of negative index years.

Growth Potential

Upside is limited but can outperform fixed interest over long periods.

Policy Control

Choose allocations, change strategies, and add riders when available.

Tax Advantages

Cash value grows tax deferred and the death benefit is generally income tax free to beneficiaries. Consult your tax advisor.

IUL Design Variables That Matter

✅Carrier crediting history and option menu

✅Current caps, participation rates, and spreads

✅Index choices including S&P 500, volatility-managed indexes, and multi-asset indexes

✅Funding pattern and premium timing

✅Cost of insurance charges and policy expenses

✅Fixed account rate and allocation rules

✅Bonuses, multipliers, and asset charges that fund those features

✅Loan type and costs. Standard loans or participating loans

✅Overloan protection rider availability

✅Death benefit options. Level or increasing

✅Surrender charge period and liquidity access

✅MEC testing and corridor limits

Request carrier illustrations and stress tests

Liquidity and Distribution Strategies

IUL provides access to cash value through withdrawals and policy loans. Withdrawals and loans reduce policy values and death benefit and can cause a policy to lapse if not managed carefully.

Withdrawals

Remove a portion of cash value. May reduce the face amount depending on policy provisions.

Standard Loans

Fixed or variable loan rate. Loaned values usually come out of index accounts to a loan account.

Participating Loans

Loaned values can continue to receive indexed credits based on carrier rules. The net cost depends on loan rate and crediting performance.

Note: Coordination with ongoing funding and adequate policy values is essential.

Important Considerations

Caps, participation rates, and spreads can change over time.
Underfunding increases the risk of lapse, especially at older ages.
Sequence of returns affects policy performance even when the average return appears similar.
Policy charges, loans, and withdrawals can reduce values and guarantees.
IUL is designed for long-term planning. Short holding periods may not be suitable.

Where IUL Can Fit

Supplemental retirement income strategies that value downside protection on credited interest
Estate planning that seeks tax-advantaged growth and permanent death benefit
Business planning such as key person coverage or executive benefit structures
Funding a trust when flexibility and liquidity are important

Compare with Whole Life for guarantees and GUL for lifetime certainty. See the Permanent Life Insurance hub for a full overview

How Living Equity Group Designs IUL

Our advanced case design team models multiple carriers and strategies. We include current rates and illustrate conservative ranges. We run historical lookbacks for common allocations and test alternate premium patterns, policy loans, and rider selections. You receive a clear side-by-side analysis that shows how choices affect long-term outcomes.

Multi-carrier illustrations with stress tests
Annual review framework and in-force support
Objective guidance on caps, floors, and loan design
Coordination with tax and legal advisors

From initial consultation through policy management, we provide clarity, transparency, and ongoing support — giving you a policy that performs in both the short and long term.

Work with our advanced case design team.

Compare Permanent Policy Types

Feature

IUL

Whole Life

GUL

VUL

Primary Focus

Flexible growth with a floor

Guarantees and stable growth

Lifetime death benefit certainty

Market exposure and control

Cash Value Driver

Indexed credits within limits

Guaranteed schedule plus dividends

Minimal emphasis on accumulation

Separate account performance

Premium Felexibility

High

Low to moderate

Moderate

High

Market Risk

Limited to crediting rules

Low

High

Common Use

Accumulation and legacy

Stability and legacy

Guaranteed coverage to age target

Growth for investors

Common Questions About Universal Life Insurance

Q: Does the floor mean I cannot lose money?

The floor applies to the credited interest for the period. Policy charges still apply. Cash value can decrease in a year with zero credit if charges exceed interest.

Q: Who sets caps and participation rates?

The carrier sets these terms and can change them for new crediting periods subject to contract provisions.

Q: What index should I choose?

It depends on goals and risk preferences. Many clients diversify among the fixed account and several index strategies. We can show historical lookbacks and current rate comparisons.

Q: How do loans affect my policy?

Loans reduce cash value and death benefit. The net cost depends on loan rate, credited interest, and policy charges. Participating loans may allow credited interest on loaned values.

Q: What is the risk of creating a MEC?

Funding that exceeds tax limits can create a Modified Endowment Contract. MEC status changes the taxation of distributions and the policy itself by losing the tax advantages of the death benefit. We test for MEC limits in every design.

Q: Can I move money between strategies?

Most policies allow transfers at the end of a crediting period within carrier rules.

See Your IUL Options With Clear Illustrations

Request an objective comparison that shows caps, floors, costs, and distribution strategies across leading carriers.

Request IUL Illustrations