What Is Indexed Universal Life (IUL)?
Indexed Universal Life (IUL) insurance is a type of permanent life insurance that combines financial protection with the potential for tax-advantaged cash value growth.
At its core, an IUL policy includes two key components:
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Death Benefit – Like any life insurance, IUL provides a tax-free death benefit to your beneficiaries. This can help replace income, cover final expenses, pay off debts like a mortgage, support college funding, or handle emergencies.
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Cash Value Component – What sets IUL apart is the ability to grow a cash value inside the policy. This value is linked to the performance of a market index (like the S&P 500), but your money isn’t directly invested in the stock market. Best of all, you can access this cash tax-free through loans or withdrawals while you’re alive.
How IUL Compares to Other Types of Life Insurance
To understand where IUL fits, here’s how it compares to more familiar options.
When people think about life insurance, they usually hear about two main types:
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Term Life Insurance – Simple, affordable, temporary coverage — usually 10, 20, or 30 years — with no cash value.
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Permanent Life Insurance – Coverage that lasts your entire life and can build cash value over time.
IUL falls under the permanent life insurance category — but it’s not the only option. There are two other main types of permanent life insurance:
Whole Life Insurance
Whole life also offers lifelong coverage and cash value, but it’s more rigid.
IUL gives you flexibility to adjust premiums and death benefits, and it has more potential for growth (though not guaranteed).
Variable Universal Life (VUL)
VUL puts your cash value directly in the market, which means you can gain — but also lose.
IUL tracks the market index instead of investing in it, so you benefit from upside potential while having protection from losses (thanks to a 0% floor).
| Death Benefit | Cash Value | Market Risk | Cash Value Growth By | |
| Term Insurance | Temporary | No | No | N/A |
| IUL | Permanent | Yes | No | Market Index |
| Whole life | Permanent | Yes | No | Guaranteed Interest + Dividends |
| Variable Universal Life | Permanent | Yes | Yes | Stock Market |
This page is library of resources that breaks down everything you need to know about IUL — including how it works, how to use it wisely, and what to avoid.
