Permanent protection
A death benefit designed to last your lifetime when the policy stays properly funded.
IUL education
Understanding Indexed Universal Life insurance
Lifetime protection for your family, plus cash value with growth potential linked to a market index. See how it works — and whether it fits your plans.
What IUL may offer
Protection and potential, in one policy
Index-linked growth potential
Cash value can be credited with interest based on the performance of a market index, up to a cap.
A floor in down years
When the index falls, credited interest won’t go below the policy’s floor — often 0%.
Flexible premiums
Adjust how much and when you pay, within the limits of your policy.
Access to cash value
Use policy loans or withdrawals for goals like education, emergencies or supplemental income.
Optional living benefits
Some policies offer riders that may allow early access to part of the death benefit for qualifying illnesses.
Features, caps, floors, riders and costs vary by insurer and policy. Loans and withdrawals reduce cash value and the death benefit.
The core mechanics
How money moves inside an IUL policy
- 1
Premium Payment
What the policy owner pays
- 2
Policy Charges and Costs
Premium charges, cost of insurance, fees
- 3
Remaining Policy Value
What is left after deductions
- 4
Contractual Interest Crediting
Calculated using an index formula
- 5
Cash Value
Can rise or fall over time
Simplified illustration. The actual allocation, order of deductions and calculations depend on the specific policy contract.
Permanent coverage and the death benefit
IUL is a type of permanent life insurance. Its primary purpose is to provide a death benefit to beneficiaries. Coverage can last a lifetime only if the policy remains adequately funded to cover its charges.
Cash value
Part of the policy value can accumulate as cash value after charges are deducted. Cash value can increase through credited interest, and it can decrease when charges exceed what is credited.
Premium payments
IUL premiums are flexible within limits. Paying less than planned — or skipping payments — can reduce cash value and increase the risk of lapse. Paying more may be limited by tax rules and the contract.
Policy charges and insurance costs
Common charges include premium charges, the cost of insurance (which typically rises with age), administrative fees, rider charges and surrender charges in early years. These continue regardless of index performance.
Interest crediting linked to an index
The insurer credits interest using a formula tied to an external market index over a set period. The policy does not own shares of the index, and dividends paid by companies in the index are typically not included.
Crediting limits
Participation rates, caps and floors
- Participation rate
- The percentage of the index’s change used to calculate credited interest, where applicable.
- Cap
- The maximum interest rate that can be credited for a period, where applicable.
- Floor
- The minimum interest rate that can be credited for a period — often 0%. It does not stop charges from reducing value.
Strong index year
Index
+12%
Credited
+9%
With a hypothetical 9% cap, crediting stops at 9% even though the index rose more.
Moderate index year
Index
+6%
Credited
+3%
With a hypothetical 50% participation rate, half of the index change is used.
Negative index year
Index
−10%
Credited
0%
A hypothetical 0% floor prevents negative crediting — but policy charges are still deducted.
All figures are hypothetical and simplified. Actual crediting methods, caps, participation rates and floors are defined by each policy contract and may change as the contract allows.
Keep your policy strong
Smart habits for long-term success
Policy loans and withdrawals
Owners may be able to borrow against or withdraw cash value. Loans accrue interest, and unpaid balances reduce the death benefit. Withdrawals reduce cash value and usually the death benefit.
Policy lapse risk
If the policy value is not enough to cover monthly charges and any loan interest, the policy can lapse. A lapse can end coverage and may create tax consequences.
Underfunding risk
Paying less than needed, lower-than-assumed crediting or rising insurance costs can leave a policy underfunded. Regular reviews help you see this early.
- 1
Premiums reduced or skipped
- 2
Charges continue each month
- 3
Policy value declines
- 4
Value can’t cover charges
Grace period notice
- 5
Policy may lapse
Simplified. Grace periods and notices are defined by the contract and state law.
Good to know
Not a bank account
Cash value is subject to charges, conditions and risks, and is not FDIC-insured.
Not a direct stock-market investment
Your money is not invested in the index. The index is only used in a crediting formula.
Not a guaranteed investment return
Credited interest varies, charges continue, and illustrated values are not guarantees.
Illustrations
Hypothetical illustrations vs. actual performance
An illustration shows how a policy might perform under specific assumptions. It is not a prediction. Actual crediting, charges and results will differ — sometimes significantly. Ask to see guaranteed values and lower-rate scenarios alongside the illustrated ones.
Hypothetical illustration
- Fixed assumed crediting rate
- Assumes premiums paid exactly as shown
- Shows a smooth, steady path
Actual policy
- Crediting varies year to year
- Charges and caps can change within contract limits
- Funding behavior changes outcomes
Educational tool
Explore how assumptions change outcomes
Adjust the hypothetical inputs to see how funding, charges and credited interest assumptions can affect a simplified policy value. This tool does not represent any actual product or insurer.
Hypothetical values only
$3,000
15
6%
$900
4%
- Total premiums paid
- $45,000
- Total hypothetical charges
- $25,200
- Hypothetical value in year 25
- $47,947
Hypothetical policy valueCumulative premiumsYear 1–25
In this hypothetical, the value covers charges through year 25.
- These are not predictions or guarantees, and they are not carrier illustrations.
- Charges are deducted before interest is credited, so the entire premium never becomes cash value.
- Real policies use age-based insurance costs, surrender charges and contract-specific crediting methods.
- Only an insurer-approved illustration can show values for a specific policy.
IUL questions, answered plainly
See if IUL fits your family’s goals
Talk with an appropriately licensed professional who can walk you through real policy options and an official illustration. Free and no obligation.