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IULs take perfect case design to make sure you maximize the growth and calculate cash value. That is where we come in. No one designs index universal life cases better than us.

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You can trust our advisors to help you find, plan, and design the best index universal life policy possible.

You can complete our 12 step IUL questionnaire in about 60 seconds. It will help us design the perfect IUL for you. We will calculate the returns quickly.

When comparing IUL companies, you need an expert who knows the carrier products inside and out. Let us help you find the best carrier.

With an IUL you are going to have questions.  We can answer all your questions and walk you through the entire quoting and buying process.

What is an IUL?

An IUL is an Index Universal Life Insurance policy.

As you approach retirement, you may be hoping to grow your savings more so that you can generate a higher amount of retirement income. Unfortunately, though, putting your savings in growth-oriented investments like a variable universal life policy could also put your money at risk.

So, what happens if the stock market plummets just as your retirement date arrives?

The good news is that there are strategies available for attaining positive market-linked returns without having to take a loss when things go south. One method is using indexed universal life insurance or IUL.

Although many people shy away from insurance products, the reality is that IUL can provide you with a great deal of growth and tax-related advantages while at the same time keeping your principal safe in any type of market environment.

It can also offer you an additional stream of tax-free income in retirement – no matter how high-income tax rates may go in the future. So in a world that is filled with financial uncertainty, cash value life insurance could be well worth looking into.

How Indexed Universal Life Insurance Works

Indexed universal life is a type of permanent life insurance plan that offers both death benefit life insurance protection for survivors, and a cash value component that can help you to grow your savings by tracking the stock market indexes.

As with other types of permanent life insurance, the growth that takes place inside of an IUL cash value account is tax-deferred. This means that no taxes are due on the gains unless or until the funds are withdrawn.

What makes IULs stand apart is the way that the return on the cash value is credited. In this case, an underlying market index like the S&P 500 or the Dow Jones Industrial Average is tracked. (In some IUL policies, you can choose to track more than just one index). There is typically also a fixed interest rate option available.

If the return on the underlying index(es) is positive in a given contract year, a positive return is credited to the IUL’s cash account – usually up to a set maximum, or “cap.” However, if the index performs poorly during a given contract year, a negative return is not credited to the account.

Rather, a guaranteed minimum “floor” (such as 0% or 1%) is given, which not only protects your contributions and previous gains, but also allows the account to build upon these gains going forward, without having to first make up for any losses. This is perfect to protect against the downside risk on market returns affecting your cash accumulations.

So, even though the positive investment return can be capped in an IUL policy’s cash value, your principal will remain safe – even during times like the recession of 2008, or the more recent COVID-19 crisis (and corresponding stock market downturn).

IUL Crediting Methods

Crediting methods refer to the amount of return that is credited to the index segment(s) of an indexed universal life policy. Depending on the insurance company and the policy, some of the more common IUL crediting methods can include the following:

  • Annual Point-to-Point – The annual point-to-point method tracks changes in the underlying index from one contract anniversary to another. It will then credit the return, based on that annual change.
  • Monthly Averaging – This crediting method takes the individual monthly value of the underlying index(es) and totals them. The total is then divided by twelve in order to determine the monthly average. In this case, the index value at the beginning is subtracted from the average in order to determine the amount of the positive or the negative index change. This amount will then be divided by the beginning value in order to determine the percentage of interest that will be credited.
  • Monthly Sum – The monthly sum method takes the percentage of the increase (if any) in the underlying market index each month and then sums them up. In this case, from one month to another the index(es) may rise or fall. But as long as the overall percentages throughout the contract year are positive, interest will be credited to the account.

With each crediting method, the change in the value of the index(es), if any, can also be subject to a cap and participation rate.

  • Cap – A cap is the maximum rate of interest that will be credited within a given time period. For instance, if the cap rate is 5%, and the underlying index has a 7% return in a contract year, then the IUL’s cash account will be credited with 5%.
  • Participation Rate – The participation rate determines how much of the underlying index’s increase will be used in computing the return. As an example, if the participation rate is 80%, and the underlying index returns 10% during a contract year, then the account will be credited with 8%. (That is because 80% of 10% is 8%). It is important to note, though, that if there is also a cap, the actual amount of the return credited could be affected.

The value at the end of a given time period (usually each contract anniversary date) will become the new starting value for the beginning of the next period. This value is referred to as the annual reset calculation.

It is important to keep in mind that even though there are various limits to the growth within an IUL policy, the interest that is credited will never be taken away – even if the underlying index(es) perform poorly in the future.

In addition, the value of the account has the benefit of continuing to grow and compound over time without having to make up for any previous losses.

Other Features of Indexed Universal Life

Many indexed universal life insurance policies offer additional features, too, such as the ability to leave a legacy for survivors through the death benefit – which is received free of income tax to the beneficiary(ies).

IUL policies may also allow for penalty-free access to the cash value funds if you have been diagnosed with a terminal illness and/or if you need to reside in a nursing home for a certain minimum period of time.

IUL Fees

As with other life insurance products, you may incur some fees when you purchase and own an indexed universal life insurance policy.

These could include an early surrender fee if you cancel the policy during the surrender charge period, cost of insurance, and policy fees & expenses.

Accessing Tax-Free Income from an IUL Policy

There are different ways that the cash value from an indexed universal life insurance policy may be accessed and used for supplementing retirement income or other financial needs of the policyholder.

This is one of the key reasons why people fund life insurance retirement plans, or LIRPs, with IUL policies. You can get to the cash by way of withdrawals or policy loans.


By taking a direct withdrawal you may take tax-free withdrawals up to your contribution amount or paid premiums.


You could also access funds tax-free by taking a loan. We talk more in depth about this and 7702 plans here. That’s because the IRS does not consider loans from life insurance cash account to be taxable income.

Going this route could provide you with tax-advantaged income in retirement, regardless of what the then-current income tax rates may be.

In addition, even though the insurance company will typically charge interest on the borrowed funds, you don’t necessarily have to “repay” the loan – at least not during your lifetime.

Rather, upon the death of the insured, any unpaid loan balance can be taken from the policy’s death benefit. The remaining amount of the death benefit proceeds will then be paid out to the beneficiary.

Pros and Cons of an IUL

While there are many benefits to owning indexed universal life, there are also some items to consider before you commit to purchasing this type of policy. So, it is helpful to understand both the pros and cons of IUL.

IUL Pros

  • Higher return potential (as compared to whole life or regular universal life insurance), without market risk
  • Tax-deferred cash value build-up
  • Ability to take tax-free loans
  • Death benefit “safety net” (which is received income tax free by beneficiary)

IUL Cons

  • Growth limitations (such as caps, participation rates, and/or spreads)
  • Withdrawals of gain are taxable (unless taken as loan)
  • Interest charged on loans (but loan can be paid off using the death benefit upon the insured’s passing)

The Best Insurance Companies for IULs

There are many insurance companies that offer indexed universal life. But some may be better than others, depending on your health condition and what you are looking for in an IUL policy (such as premium amount and choice of underlying indexes to track).

See our full best life insurance carriers page here.

We offer IULs from over 30 companies, but these are the best IUL companies currently:

One important factors to consider when choosing an indexed universal life policy is the financial strength and stability of the insurer. You can determine this by reviewing the ratings the insurance carrier has received from A.M. Best, Standard & Poor’s, Fitch, and/or Moody’s Investor Services.

Working with an independent life insurance agent like an Insurance Geek can help you to narrow down which IUL policy and the insurance carrier is right for you. They can also help you to understand how the plan will work so that you know what to anticipate.

In addition, because independent insurance agents can go out into the marketplace and find the plan and insurance company that is right for you, it can better ensure that this retirement saving income-generating strategy more closely fits your specific goals and planning.

Is an IUL Insurance Policy Right for You?

Permanent life insurance policies offer many enticing features with IUL – including tax-deferred growth, market-linked return, and tax-free access to the cash value savings component – this type of financial vehicle is is a great investment for some.

If you would like to learn more about the retirement savings benefits of indexed universal life, or if you’re interested in running an IUL policy quote, you can try our IUL calculator here or you can contact us.

We work with more than 30 of the top-rated life insurance carriers in the industry, and we’re familiar with the available products that each one offers, as well as with their underwriting guidelines.

So, if you’ve got questions, we can quickly provide you with the answers that you need. We look forward to hearing from you.

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