Can You Lose Money in an Indexed Universal Life Insurance Policy (IUL)? It is unlikely you will lose money in an IUL because insurance providers set a guarantee for your principal to protect it against losses in the market. However, there also is often a cap on the maximum amount you can earn. Is Indexed Universal Life Insurance (IUL) Better Than a 401(K)? For most people, no, IUL isn't better than a 401(k) in terms of saving for retirement. Most IULs are best for high-net-worth individuals looking for ways to reduce their taxable income. A 401(k) is a better investment vehicle because it doesn't carry the high fees and premiums of an IUL, plus there is no cap on the amount you may earn, unlike with an IUL policy. What Are the Cons of Indexed Universal Life (IUL)? Indexed universal life policies cap how much money you can accumulate, often at less than 100%, and they are based on an possibly volatile equity index. While you may not lose any money in the account if the index goes down, you won't earn interest. If the market turns bullish, the earnings on your IUL will not be as high as a typical investment account. The high cost of premiums and fees makes IULs expensive and considerably less affordable than term life. Is IUL Better Than Whole Life? Not necessarily. IUL insurance policies have an investment element, which can grow and earn interest connected to an equity index. They also have flexible premiums. Whole life insurance is a more straightforward form of permanent life insurance, with a guaranteed death benefit, fixed premiums, and cash value component that acts like a savings vehicle, rather than an investment account. Whole life is easier to understand but may not provide the upside that IUL can.
29
Powered by FlippingBook