Blueprint: IUL - Indexed Universal Life Insurance

The XYZs of how IUL policies work (and sometimes fail)

Welcome to the latest edition of The Architecture of Finance! In this installment, I’m about to unveil the intricate design of Indexed Universal Life Insurance (IUL). Remember how people used to knock on our doors to sell vacuums?

Now, they’re popping up on your social media feeds…selling an insurance product with just as much hidden power as that special vacuum. Let’s talk about how an IUL works, so you can understand how to and/or to not use it!

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🏦 The IUL Blueprint 🏦

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Indexed Universal Life Insurance is like that fancy guest room design. There’s a Murphy bed in the wall for sleeping. There’s a fancy standing desk with storage that slides around like a Transformer until it looks like a dresser. There’s even a sliding wall that pops off the bookcase to split the “office” area from the “room”. Fancy. Complex. It kind of does it all…heck, we could throw a kitchen stove top on the shelf above the toilet.

Photo by Aditya Vyas on Unsplash

Enough analogies. This is a life insurance policy.

• Death Benefit: there is a death benefit that should pass tax-free to the listed beneficiaries if you die.

• (Universal) Flexibility: universal policies give you a minimum & maximum premium payment you can make, with a minimum guaranteed death benefit.

• Cash Value Growth: an IUL takes the “extra” premiums you were overcharged for, and places them in a special account where you will be invested.

• Tax Advantages: that invested cash value grows tax-deferred and can be accessed through tax-free withdrawals and loans.