Life Insurance

What Is An IUL?

What is Indexed Universal Life Insurance?

An Indexed Universal Life (IUL) policy is permanent life insurance that provides:

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What is an IUL Policy?

IUL policies help generate wealth and leave a legacy for your loved ones. Indexed universal life insurance pays interest according to the movement of the stock market.  Your cash value can earn interest based on an index such as the S&P 500, selected by your insurance company.

There are several common types of universal life insurance. One example is a fixed rate that is adjusted for inflation. Another example is the variable rate which is invested in the stock market, so it carries a lot of risks. Indexed universal life policies have some advantages over other universal life policies. IUL’s may be an option for those seeking insurance that offers the flexibility of universal life but with higher growth potential. These products can also offer some of the upside potential of the stock market with limited risks. An Indexed Universal Life Policy’s principle is guaranteed*, while the interest rate is based on market conditions. This can be a beneficial situation. Hybrid Financial can walk you through options based on your specific needs.

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How Indexed Universal Policies Work

An insurance premium covers some of the cost based on the life expectancy of the insured. After the fees are paid, the rest is added to the cash value. Also, the value of your money may earn an interest rate based on an index. The cash value is credited with interest based on the increase in an index (and there is no direct investment into the stock market).  In some policies, you can select more than one index instead of just one. This allows you to diversify your IUL. 

There are several ways to allocate your money, some of which generate fixed interest while others fluctuate according to an index. Additionally, this cash may earn interest depending on the index. You can earn interest on the third part of your money by investing in another index. In order to successfully plan for retirement, you have several options. Connect with us to learn more about IUL and how it might fit your needs.

Lifetime Benefits of IUL

An IUL policy can benefit your retirement strategy in a number of ways. 


The insurance company assumes the risks so that you are protected from loss. As an alternative, you can tie your return rate to a stock index. While an IUL is linked to an index it is not directly invested in an index. So, if the market has a downturn, you won’t lose money as you would if you invested directly in an index fund. Therefore, your IUL cash value can generate a reasonable return**. An IUL can protect your money no matter what happens in the market.


An IUL is an insurance product as opposed to investments, so you may have more flexibility. IULs and traditional retirement accounts may have different tax laws and rules. Also, IUL policies have no annual contribution limits like 401(k)s or IRAs. Additionally, an IUL policy can be withdrawn at any time for its cash value, without penalty, regardless of age. Further, IULs don’t require minimum distributions (RMDs) at 72.

More benefits are available. You can finance your policy with a lump sum or by paying overtime. Also, the cash value can be used as income. And, you can do so without paying income taxes since it is fluid. Additionally, distributions from IULs are tax-free. Finally, one of the most important aspects may be that you can access your death benefit while still alive, tax-free, to pay for long-term care. Get in touch with us to learn about all your options.

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Protect Your Family’s Legacy

Your family may inherit a portion of your wealth after you pass away. Depending on how the index performs, the death benefit may increase over time. Your beneficiaries usually receive far more money than you originally contributed. Beneficiaries’ benefits are permanent, nontaxable, and do not need to go through probate. 

Our team at Hybrid Financial can assist you in picking the right life insurance plan to suit your needs and protect those you care about.

*Backed by the claims-paying ability of the carrier.
**Reasonable rate of return over time.

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