Frequently Asked Questions
Find answers to common inquiries about our Insurance services.
What is an Indexed Universal Life (IUL) policy?
An IUL is a type of permanent life insurance that provides a death benefit while allowing you to build cash value over time. The cash value growth is tied to the performance of a stock market index, such as the S&P 500, offering potential growth with downside protection.
. How does an IUL differ from other types of life insurance (e.g., term, whole, or traditional universal life)?
● Term life insurance provides coverage for a specific period but has no cash value.
● Whole life insurance offers guaranteed cash value growth and fixed premiums but less flexibility.
● Traditional universal life insurance allows flexible premiums but may not offer indexed growth.
● An IUL combines the flexibility of universal life insurance with the potential for market-linked cash value growth.
Who is a good candidate for an IUL policy?
An IUL is ideal for individuals looking for life insurance with a long-term savings component, tax-advantaged growth, and the flexibility to adjust premiums. It can also appeal to those seeking supplemental retirement income.
Is an IUL primarily for protection or investment purposes?
An IUL is primarily a life insurance product that offers a death benefit. However, its cash value growth feature can also serve as a financial tool for wealth accumulation and supplemental retirement income
How does the cash value grow in an IUL?
The cash value grows based on the performance of a selected stock market index, subject to caps, participation rates, and floors. You won’t directly invest in the market, but your growth is linked to its performance.
What are the indexing options, and how do they work?
Indexing options allow you to choose how your cash value is credited based on the performance of market indices like the S&P 500. Each option has parameters like:
● Caps: Maximum return you can earn.
● Participation rates: The percentage of the index growth credited to your account.
● Floors: Minimum guaranteed return, typically 0%, ensuring no losses in a market downturn.
Is the cash value guaranteed?
The cash value has a guaranteed minimum growth floor, usually 0%, protecting it from market losses. However, growth above the floor is not guaranteed and depends on the index's performance and the policy's terms.
What is the death benefit in an IUL policy?
The death benefit is the amount paid to your beneficiaries upon your death. IUL policies offer flexible death benefit options:● Level death benefit: Fixed amount.
● Increasing death benefit: Combines the policy's face value with its cash value.
Can I take loans or withdrawals from my IUL policy?
Yes, you can access your policy's cash value through loans or withdrawals, typically on a tax-free basis. However, loans accrue interest, and withdrawals may reduce the cash value and death benefit.
Are there fees or costs associated with an IUL?
Yes, IUL policies have fees, including administrative charges, cost of insurance, and fees for riders. These are deducted from premiums or the cash value.
What is a premium?
Insurance premium is the amount you pay on a monthly basis to maintain coverage by an insurance company.
How are premiums structured in an IUL? Can I adjust them over time?
IUL policies offer flexible premiums, meaning you can adjust your payments within certain limits set by the insurer. This flexibility allows you to increase, decrease, or even skip payments as long as the policy maintains sufficient cash value to cover costs.
Is there a minimum or maximum amount I can contribute?
Yes, insurers set minimum premiums to keep the policy active. Maximum contributions are governed by IRS rules to maintain the tax-advantaged status of the policy. Overfunding the policy may result in it becoming a Modified Endowment Contract (MEC), which alters tax benefits.
What happens if I miss a payment?
If you miss a payment, the policy can stay active as long as the cash value covers the cost of insurance and fees. However, missed payments may reduce the cash value and could eventually lead to a lapse if not addressed.
Can I overfund my IUL to maximize cash value growth?
Yes, overfunding your IUL is a common strategy to build cash value faster. However, it's important to stay within IRS limits to avoid turning the policy into a MEC, which impacts its tax benefits.
What are the risks of an IUL policy?
While an IUL protects against market losses, growth is limited by caps and participation rates. If the index performs poorly for extended periods or fees outpace growth, the cash value could decline.
Can my policy lapse?
Yes, your policy can lapse if the cash value becomes insufficient to cover costs. Regularly monitoring your policy and adjusting premiums can help prevent this.
Is an IUL policy right for everyone?
No, IULs are not suitable for those who need simple term life insurance or who may struggle with premium flexibility. They are better suited for those seeking a blend of life insurance protection and long-term financial growth.
How can I apply for an IUL policy?
Contact us to schedule a consultation. We’ll guide you through the application process, including a financial needs analysis and any required medical underwriting.
Can I customize my IUL policy?
Yes, IULs offer flexibility in premiums, death benefits, and optional riders like long-term care or disability waivers to tailor the policy to your needs.
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