What Is IUL (Indexed Universal Life)? Definition

Why it matters

IUL credits interest using a formula with limits, such as a cap or participation rate, and often a floor that prevents a negative credit in a down year. Credited returns are usually lower than the index itself. Charges, caps, and illustrated values are not guaranteed and differ by carrier. FINRA and the SEC advise buyers to read the illustration closely. Agents should explain that the cash value can be reduced by policy charges and that poor funding can cause a lapse.

Source: investor.gov

Where we use this term

Related terms

Universal Life Insurance: Universal life insurance is a type of permanent coverage with flexible premiums and an adjustable death benefit. Part of each payment funds the cost of insurance, and the rest goes to a cash value account that earns interest.
Cash Value: Cash value is the savings part of a permanent life insurance policy. It grows over time at a rate set by the policy and can be borrowed against or withdrawn, subject to the contract terms.
Policy Loan: A policy loan is money you borrow from the carrier using your policy's cash value as collateral. The policy stays in force if you keep paying interest and the loan stays below the cash value.
Premium: A premium is the amount you pay to keep an insurance policy active. You can pay it monthly, quarterly, semiannually, or annually, depending on the carrier.
Lapse: A lapse happens when a life insurance policy ends because the owner did not pay the premium by the end of the grace period. Coverage stops unless the policy is reinstated.

All 241 terms

Indexed Universal Life (IUL)

Why it matters

Where we use this term

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