One of the most exciting things about an iul or index universal life insurance policy is that you can increase the cash value portion of your insurance policy. The policy builds cash value based on premium payments that exceed the cost of insurance and other expenses and the performance of the underlying index.
One of the benefits of using an iul is that it is tied to changes in an indexed account, allowing you to enjoy the upward growth of the market while enjoying protection against negative returns. So you can go up without coming down in other words. The index account in the iul usually has a floor and a limit
Sometimes you could hit the limit, which could give you double digit profits in some years in the market. Similarly, while you would still have policy costs and expenses, you will not receive negative credit when the market falls. This means that when the market goes up, your money can grow, but when the market goes down, you are protected and your money cannot go into negative credit due to a market drop, but you will still have policy fees and charges.
This can be very beneficial in times of market turbulence. In years when the market is rising, so is your cash values, and when the market is falling, the bottom comes in and you receive a credit of zero, and you are protected against that loss. Your money is locked so you don’t lose! You do have to pay the policy fees and charges.
Why is this so important now? Because inflation is one of the biggest threats to growing your money and what if inflation is 3 to 5% or even higher depending on the monetary policy of the government? It is important for your money to outpace inflation. If your money is growing slower than inflation, you are not growing your money – you are actually decreasing its value over time.
The iul allows you to outpace inflation by taking advantage of potential growth in the years the market goes up. The cash value growth in your indexed Universal Life policy is linked to the S&P 500, but your cash is not actually invested in the market. Your money is protected from market loss because it is not directly in the market, but at the same time you benefit from the growth of the S&P 500 to a cap or limit.
Let’s say the upside cap is 12%. This may differ per policy. This means that cash value growth would be limited to just 12%. Having a limit is actually a good thing because it allows the insurance company to protect you from losses in the years when the market is down.
Now you can grow your money when the market rises, outpace inflation with potential double-digit gains, and never worry about losing money when the market falls. What peace of mind would that give you, knowing that your money is protected from market volatility?
So the index strategy makes sense for people who want to avoid market risk, but still have the option of double-digit gains and all the other benefits an IUL can offer them. This strategy allows you to save more money even without changing your current lifestyle.
With the supercharged index and strategy you can:
Take advantage of double-digit gains in recent years.
Help beat inflation.
Let your money grow tax-free.
Access cash values without paying taxes.
Ensure a lifetime of cash flow.