What is Indexed Universal Life Insurance?

Indexed Universal Life (IUL) Insurance offers cash value build-up based on changes in stock market indices. It's less risky than Variable Universal Life Insurance. Your increased cash value is generally protected from downside risk, subject to floors.


Reasons to consider universal life insurance

Unlimited contributions

Index Universal Life insurance does not have any contribution limits, unlike tradition retirement avenues.

Tax-free growth and distributions

Similar to a Roth IRA, IUL offers tax-free distributions rather than tax-deferred.

permanent protection

Flexible payment options are available with universal life insurance. You can pay your premium until you're 100 years old, pay over the course of 10-20 years, or make one large payment. The longer your pay period, the smaller your premium will be.

Is an Indexed universal life insurance policy right for you?

Low risk is probably the most attractive part of getting an IUL. You can take advantage of stock market returns without too much stress about the risk of loss. Additionally, you can accumulate more in your death benefit which your beneficiaries will receive tax-free after you pass. 

Benefits of an IUL are: 

  • No contribution limits, unlike other retirement plans.
  • Like a Roth IRA, IULs offer tax free growth and distributions. 
  • IULs do not have age restrictions. Other retirement plans require you to be 59.5 years old before you can start taking distributions. However, this does not exist with an IUL.
  • Death benefits that are given to beneficiaries are not subject to income or death taxes. 
  • You can take a loan from your cash value penalty, and tax-free. The money you take out does not have to be repaid.

Indexed universal life insurance

Indexed universal life insurance is low risk compared to variable life insurance. Cash value accumulates based on positive changes in the stock market and the way it’s performing.

A type of permanent life insurance, indexed universal life, offers both a death benefit and a cash account. The amount of the death benefit is decided at the start of the policy but can change. The amount in the cash account increases based on the way the stock index is doing.  

The S&P 500 and Dow Jones Industrial Average are stock market indices. They are a way to track a group of stocks. Insurance companies choose at least one of these and distribute interest to policyholders based on how their indexes are doing — if the value increases, the account earns positive interest. If the index lowers, the account earns less or possibly nothing.

Universal Life Insurance Premiums

Your premium payments are the main source of funds for your cash account. Your premium payments also cover the cost of insurance (death benefit), rider charges, and any other fees associated with your policy. Then, the remaining amount from your premium will be added to your cash account. If you miss a payment or don’t pay enough for your premium, the company will take those fees from your cash account. 

To minimize large changes in interest payments, the amount of money you can earn is subject to “floors” and “caps.” The floor is the lowest your account rate can fall, which is often set at 0%. 

On the other hand, caps are the highest interest rate that your cash-value account can earn. If the market increases more than your cap, you’ll only earn the cap amount. Your insurer can change the cap while your policy is active.

Consult with the National Educational Services life insurance agent to learn what type of policy best fits your individual needs. 

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Frequently asked questions

Life insurance can be confusing. Find answers to the most frequently asked questions.

The IUL gives you the opportunity to grow your policy value through excess index interest (earnings above the guaranteed minimum rate) that may be credited to your policy based partly on changes in these major stock indexes: S&P 500® Index, EURO STOXX 50® INDEX, and the Hang Seng Index.3 We’d love to talk you through the different account options and help you see if this policy is a good fit for you.

Index changes can be positive or negative. However, with the IUL, you have the security of knowing you will never be credited less than the guaranteed minimum interest rate, or "floor." The floor can protect your cash value and helps ensure that segments with a positive value will be credited with interest.

Federal income tax-free death benefit
Many people don’t realize there can be tax consequences when it comes to inheriting certain assets. Thankfully, IUL provides a federal income tax-free death benefit to help protect your family.
Tax-deferred earnings 
Any cash value in your policy accumulates interest on a tax-deferred basis. That means higher policy value accumulation potential for you.
Tax-free transfers 
Transfers among accounts inside a policy are on a tax-free basis. Tax-free transfers help protect your earnings from the effects of current taxes.
Tax-free withdrawals and loans
You’ll enjoy easy access to your policy value. When the policy value is sufficient, you may request withdrawals or loans to use for any purpose you wish.
Keep in mind that the tax advantages only apply as long as the policy remains in force. Allowing the policy to lapse could result in adverse tax consequences.


Payment of the minimum monthly no-lapse premium ensures that the policy will remain in force during the no-lapse guarantee period. However, by paying only the minimum monthly premium, you may be forgoing the opportunity to build up additional policy value.
Please note, after the no-lapse period or if the cumulative minimum monthly no-lapse premium requirements are not met, then fluctuations in interest rates and/or policy charges may require the payment of additional premiums to keep the policy in force. Guarantees are based on the claims-paying ability of the company. 
4 If you take a cash withdrawal or a loan, if you increase your face amount, if you change the death benefit option, or if you add or increase the amount of a rider, you may need to pay additional premiums in order to keep the No-Lapse Guarantee in effect. If the requirements of the No-Lapse Guarantee are not met and the cash surrender value is not enough to meet the monthly deductions and index account monthly charges, a grace period will begin and the policy will lapse at the end of the grace period unless sufficient payment is made. Allowing the policy to lapse may result in adverse tax consequences.