market, thus reducing risk. • Easier distribution: The cash value in IUL insurance policies can be accessed at any time without penalty, regardless of a person’s age.4 • Unlimited contribution: IUL insurance policies have no limitations on annual contributions.8 Disadvantages • Caps on accumulation percentages: Insurance companies sometimes set a maximum participation rate that is less than 100%. • Better for larger face amounts: Smaller policy face values don’t offer much advantage over regular UL insurance policies. • Based on a variable equity index: If the index goes down, no interest is credited to the cash value. (Some policies offer a low guaranteed rate over a longer period.) Other investment vehicles use market indexes as a benchmark for performance. Their goal normally is to outperform the index. With IUL, the goal is to profit from upward movements in the index. • Growth does not include stock dividends: Because the insurance company only buys options in an index, you're not directly invested in stocks and you don't benefit when companies pay them to shareholders. • Management fees: Insurers charge fees for managing your money, which can drain cash value. Is Indexed Universal Life Insurance (IUL) a Good Investment? An IUL can be a good way to save up money in a cash value account that, connected to a market index, may earn modest returns, but it is first and foremost a life insurance policy, not an investment vehicle.
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