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Policy Types

What is indexed universal life insurance?

People often consider indexed universal life, a type of permanent* life insurance, when they're looking for the potential of cash value in addition to life insurance protection.

Today, many people are looking at the value of permanent life insurance with its ability to provide long-term protection along with cash value. As such, indexed universal life (IUL) has become a popular choice in providing permanent life insurance protection, and an even greater potential for growth through indexing of interest credits.

How it works

Like other types of permanent life insurance, the premium payments you make to your IUL policy have the potential to earn interest and grow the cash value of your policy. However, what makes IUL different is the way interest is credited to your policy. In addition to offering a traditional declared interest rate, IUL offers the opportunity to earn interest that is linked to the performance of a selected choice of market indices.

When the linked index performs well, your cash value builds at a faster rate. In contrast, if the index doesn't do well, your cash value will accumulate at a slower rate. The amounts credited to the cash value in your IUL grow tax-deferred, and may be used to pay insurance premiums, providing the flexibility to reduce or even stop making out-of-pocket premiums payments as long as the minimum premium payment is being met.

Flexibility for greater growth

As with a regular universal life insurance policy (UL), IUL allows for a flexible premium. This means you can choose to contribute more to your policy (within federal tax law limits) in order to help you build up your cash value even faster. However, it's important to note that many IUL policies have policy rates, whereby your indexed crediting rate is limited. This means you'll have a limit on how much you can earn even if the index does extremely well.

A guaranteed credit

Most IUL policies come with a guarantee that you will not lose cash value due to index performance. So if the index goes down in a year, your cash value won't. It's important to note that the account value, any policy loans or surrenders may be subject to policy charges, surrender charges, transaction fees, and may reduce the cash value and death benefits of your policy.

An IUL policy can be a good way to provide your loved ones with the protection of a permanent life insurance policy along with the potential to grow and protect its cash value.


*As long as required premium payments are timely made.



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All Learning Center articles are general summaries that can be used when considering your financial future at various life stages. The information presented is for educational purposes and is meant to supplement other information specific to your situation. It is not intended as investment advice and does not necessarily represent the opinion of Protective Life or its subsidiaries.

Learning Center articles may describe services and financial products not offered by Protective Life or its subsidiaries. Descriptions of financial products contained in Learning Center articles are not intended to represent those offered by Protective Life or its subsidiaries.

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