What are the benefits of an Indexed Universal Life (IUL) policy?
One of the most exciting things about an iul or index universal life insurance policy is that you can add to the cash value portion of your insurance policy. The policy builds cash value based on premium payments that exceed the cost of insurance and other expenses and the performance of the underlying index.
One of the benefits of using an iul is that it is linked to changes in an indexed account which can allow you to enjoy bullish market growth while enjoying protection against negative returns. So, you can go up without going down, in other words. The index account on the iul usually has a floor and a stop.
Sometimes you can hit the ceiling that could earn you double-digit returns in some years when the market is in profit. Similarly, even though you would still have policy fees and expenses, you will not receive a negative credit when the market dips. This means that when the market is up, your money can grow, but when the market is down, you are protected and your money cannot be negatively credited due to a market downturn, but you will still have policy fees and expenses.
This can be extremely beneficial in times of market turbulence. In years when the market goes up, so do your cash values and when the market goes down, this is where the floor comes in and you get a credit of zero, and you’re protected against that loss. Your money is blocked so you don’t lose! However, you will have to pay the policy fees and expenses.
Now why is this so important? Because inflation is one of the biggest threats to growing your money and what if inflation is between 3% and 5% or even higher depending on the government’s monetary policy? It is important that your money beats inflation. If your money is growing more slowly than the rate of inflation, you are not increasing your money, it is actually decreasing in value over time.
The iul can allow you to beat inflation by capitalizing on potential growth in years when the market is up. The cash value growth of your indexed universal life policy is tied to the S&P 500, but your cash is not actually invested in the market. Your money is protected from any market losses because you are not directly in the market, but at the same time you benefit from the growth of the S&P 500 up to a limit or cap.
Let’s say the bullish top is 12%. This can vary from one policy to another. This means that cash value growth would be limited to just 12%. Having a cap is actually a good thing because this is what allows the insurance company to protect you against loss in those years when the market is down.
Now you can grow your money when the market goes up, you could beat inflation with potential double-digit earnings, and you never have to worry about losing money when the market goes down. What kind of peace of mind would it give you to know that your money is protected from market volatility?
Therefore, the index strategy makes sense for people who want to avoid market risk but still want the possibility of double-digit gains and all the other benefits that an IUL can bring them. With this strategy, you could save more money even without changing your current lifestyle.
The Supercharged Index and Strategy could allow you to:
Benefit from double-digit earnings in rising years.
Helps beat inflation.
Grow your money tax-deferred.
Access cash values without incurring taxes.
Provide lifetime cash flow.
