Indexed Universal Life (IUL) insurance has been gaining popularity in recent years as a flexible and potentially lucrative life insurance option. IUL is generally considered to be more volatile than fixed universal life policies but less risky than variable UL, since IUL does not invest in the stock market directly. Instead, IUL policies link their cash value growth to a stock market index, providing policyholders with the opportunity for higher returns.
The author explores the potential areas of policyholder behavior risk in IUL products and where actuaries should pay particular attention to the lessons of the past. While IUL can offer attractive returns, it also comes with certain risk, such as policy lapses or changes in market conditions that could impact cash value growth.
Indexed universal life insurance works similarly to universal life. You pay a premium in exchange for lifelong coverage and have the opportunity to build cash value over time. However, the key difference lies in how the cash value is credited – through a stock market index rather than a fixed interest rate.
IUL is a life insurance product that offers the opportunity for investment growth, while a 401(k) prioritizes long-term savings with employer-matching features. This unique combination of insurance and investment features has made IUL an appealing option for individuals looking to secure their financial future.
Prudential Financial, Inc., has launched Prudential Momentum IUL℠, a new indexed universal life product issued by Pruco Life Insurance. This innovative product aims to provide policyholders with the benefits of IUL while also addressing potential risk associated with market volatility.
Find out why Penn Mutual topped our list of the best universal life insurance companies. Plus, get average costs for universal life policies and compare them to IUL products to determine which option may be best suited for your financial goals.
For instance, all UL products and any general account product that depends on the performance of insurers' bond portfolios will be subject to interest rate risk. This is a crucial factor to consider when evaluating the potential returns and risk associated with IUL products.
An IUL account is the part of an indexed universal life insurance policy that's supposed to build cash value over time (kind of like a savings account). Policyholders can access this cash value through loans or withdrawals, providing them with additional financial flexibility.
Both offer a blend of life insurance coverage with opportunities for cash value growth. However, they operate differently in terms of structure, flexibility, and risk. Understanding these differences can help individuals make an informed decision when choosing between a 401(k) and an IUL policy.
