• Indexed universal life insurance, or IUL, is a type of universal life insurance. Rather than the cash value portion growing on a fixed interest rate, it’s tied to the performance of a market index, like the S&P 500.
• Unlike investing directly in an index fund, however, you won’t lose money when the market has a downturn. This is because a guarantee applies to your principal, insuring it against losses. On the other hand, there’s usually a cap on the maximum return you can earn. Many times, you’ll also be able to divide your assets between fixed and indexed portions of your policy.
• Whole life insurance: This is a permanent policy, which means that there’s no time limit on when your family can receive a benefit. Furthermore, some of the premiums you pay go toward funding a cash account. Once enough money inhabits that account, it will fund your eventual payout. However, you can also borrow against or withdraw from the cash while you’re still alive.
• Universal life insurance: Also a permanent policy, it comes complete with a cash-value account. They’re mainly differentiated by their flexibility, allowing you to adjust your premiums and death benefits. You may also be able to realize higher interest rates on the growth of the cash value and use that cash value to pay for premiums.
• Term life insurance: This type of insurance covers a specific time frame which typically ranges from 10 to 30 years. It’s a temporary type of coverage since it covers you for a certain amount of years. If you die within the covered period, your family gets a death benefit, which it can use to cover funeral expenses and replace your lost income. It’s usually less expensive than other insurance options.
• One of the most attractive features of an IUL is the ability to take advantage of stock market returns without the risk of loss. And it does so while building up a death benefit that your beneficiaries will receive tax-free.
• Unlimited contributions: Traditional retirement avenues have contribution limits, but IULs don’t.
• Tax-free growth and distributions: “IUL distributions are tax-free versus tax-deferred in the other vehicles,” says Chris Abrams, an IUL expert at Abrams Insurance Solutions. That means you don’t have to pay taxes on the money you eventually draw from the cash value of the IUL.
It’s similar to a Roth IRA in this respect.
These top 5 reasons someone purchases Life Insurance: (What is your reason?)
#1 – Final Expense coverage
#2 – Cover Family’s Monthly Expenses
#3 – Mortgage Payoff
#4 - Send kids to College
#5 - Build a Nest Egg