Indexed Universal Life Insurance
Indexed universal life is permanent life insurance whose interest credit follows a market index, with a floor underneath and a limit above. It is a legitimate product that is very often explained badly, so this page explains the parts that get left out.
Read this first
Indexed universal life is life insurance, not an investment. You are not invested in the stock market, you do not own an index, and you receive no dividends from the companies in it.
Caps, participation rates and spreads are set by the insurance company and can be changed. Only the contractual minimums are guaranteed.
A 0% floor applies to the index credit, not to your account value. Cost of insurance, expense loads and rider charges are deducted whether or not the index rises, so the account value can fall in a year the index credit is zero.
Any illustration you are shown is not a prediction. It must show guaranteed as well as non-guaranteed figures, and the non-guaranteed columns depend on rates the insurance company may change.
The problem it solves
The appeal is easy to state: permanent coverage, flexible premiums, and cash value that participates when an index rises without losing index credit when it falls. For a buyer who wants permanence and some upside, that is a real proposition, and IUL is a real product that does real work.
The difficulty is that almost every part of how it behaves is controlled by the insurance company rather than fixed in the contract, and the way the product is typically presented — a projection with an attractive number at the bottom — hides that. This page is written to put it back.
Three things happen, in this order
You pay flexible premiums into a policy with a cost of insurance
Charges for the insurance, expenses and any riders are deducted from the account value every month. They continue in good years and bad, and the cost of insurance rises as you age.
Interest is credited by reference to an index, not by investing in it
You do not own the index and receive no dividends from the companies in it. The credit is calculated from the index's movement and then limited by a cap, a participation rate or a spread, whichever the policy uses.
A floor limits the index credit, not the account value
In a year the index falls, the index credit does not go negative. Your account value can still fall, because the policy charges come out regardless. This is the single most misunderstood feature of the product.
Who this suits, and who it does not
The second list matters more than the first. An agent who only writes the first one is selling, not advising.
Worth considering if…
- You want permanent coverage, you can fund it properly and consistently, and you understand you are buying insurance rather than an investment.
- You will actually read an illustration, including the guaranteed column, and ask what happens if the non-guaranteed assumptions are not met.
- You want premium flexibility across years where your income varies, and you will review the policy's funding regularly rather than setting it and forgetting it.
Probably not for you if…
- You want market returns. Buy investments. An IUL credits interest by reference to an index, net of charges, limited by a cap the insurer may change — it is not a way to be in the market, and treating it as one ends badly.
- You will underfund it. An underfunded policy can lapse in later years when the cost of insurance is at its highest, taking the coverage and the accumulated value with it. That outcome is the reason this product is so heavily litigated.
- You are being sold it as tax-free retirement income and nobody has explained the policy loans that produce that income, what happens to the loan if the policy lapses, or the tax consequence if it does. Ask those three questions. If the answers are vague, stop.
Who we are appointed with
We are independent and appointed with the life insurance companies below. Which of them we would approach for you depends on the product, your age, your state and your health history — underwriting differs sharply between companies, and that is the practical reason for working with someone who can approach more than one.
- Aetna
- Allianz Life
- American-Amicable Life
- Americo
- Ameritas
- Assurity
- Athene
- AuguStar Financial
- Banner Life
- Brighthouse Financial
- Cincinnati Life
- Columbus Life
- Corebridge Financial
- Equitable
- EquiTrust Life
- F&G Life
- Foresters Financial
- Gerber Life
- Guarantee Trust Life (GTL)
- John Hancock
- Lafayette Life
- Liberty Bankers Life
- Lincoln Financial Group
- Manhattan Life
- MassMutual
- Mutual of Omaha
- Mutual Trust Life
- National Life Group (Life Insurance Company of the Southwest)
- National Western Life
- Nationwide
- New York Life
- North American Company for Life and Health
- OneAmerica
- Pacific Life
- Petersen International Underwriters (Lloyd's of London)
- Principal
- Protective Life
- Prudential
- Royal Neighbors of America
- Sagicor Life
- SBLI
- Securian Financial (Minnesota Life)
- Security Mutual Life
- Symetra
- Transamerica
- William Penn Life
- Zurich
Being appointed with a company does not mean that company offers every product on this page, and we do not represent every insurer. Which company suits you depends on the product, your age, your state and your health history. We publish no benefit, rate or feature for any company here until we can cite it to that company's own current material.
Servicing only — not available for new business
We can help with an existing policy from this company — reviewing it or understanding what you already own. We are not appointed to write new business with it, so a new policy would be placed with one of the companies above.
- Genworth
Questions people actually ask
Am I invested in the stock market?
No. This is the most important sentence on the page. Your money is not in the index, you do not own any of the companies in it, and you receive none of their dividends. The insurance company credits interest to your account using a formula based on the index's movement. That formula is limited by a cap, a participation rate or a spread, and those limits are set by the insurer.
Can the company change the cap or participation rate after I buy?
Yes, within the contract's guaranteed minimums, and this is central to understanding the product. The current cap or participation rate is current, not promised. What is actually guaranteed is the contractual minimum, which is usually much less attractive than whatever is being illustrated. Ask for the guaranteed minimum cap and participation rate in writing, and ask what the company has done historically with renewal rates.
Does the 0% floor mean I cannot lose money?
No, and any explanation that stops at 'you cannot lose' is wrong. The floor means the index credit will not be negative. Cost of insurance, expense loads and rider charges are still deducted from the account value in that year, so the account value can fall. Several flat years in a row can leave a policy materially weaker than the original projection showed.
Can the policy lapse even though it has cash value in it?
Yes, and this is the failure mode that causes the most harm. The cost of insurance rises with age. If the account value is not large enough to carry those rising charges — because the policy was underfunded, because credits were lower than illustrated, or because loans were taken — the policy can require far larger premiums to survive or lapse outright, often in the policyholder's seventies or eighties. Review the funding every few years rather than assuming it is on track.
What does the illustration actually tell me?
That the policy behaves as described if a set of assumptions holds, and nothing more. An illustration is required to show guaranteed as well as non-guaranteed figures, and the regulators have tightened what may be shown specifically because illustrated performance was being presented in misleading ways. Read the guaranteed column first. If the policy only makes sense in the non-guaranteed column, you are being sold a projection rather than a plan.
Ask for a quote on Indexed Universal Life Insurance
Tell us how to reach you and which state you are in. A licensed agent calls back, usually the same business day, and will tell you plainly if a fully underwritten policy would serve you better.
The other three
Same family, different jobs. Match the product to how long the need lasts.
Burial Insurance
Small-face whole life insurance bought to cover a funeral and the bills that arrive with it. The industry calls it final expense life insurance; buyers call it burial insurance.
Worth a look if you want to cover a funeral without leaving the bill to your family.
Term Life Insurance
A death benefit for a fixed number of years, at the lowest cost per dollar of coverage of any life product. Bought when someone depends on your income and the need has an end date.
Worth a look if someone depends on your income and you can name roughly when that stops being true.
Whole Life Insurance
Permanent coverage with a guaranteed death benefit, a guaranteed level premium and a guaranteed cash value schedule. The guarantees are the product, and they are what you pay for.
Worth a look if the need genuinely never ends and you can sustain the premium for decades.