9 Best Reasons to Buy Indexed Universal Life
IUL is a type of universal life insurance that offers an insurance benefit paired with a cash account that can be used to pay policy premiums. In an indexed product, the cash portion is tied to a stock market index like the S&P 500.
Insurers credit interest to consumers based on market performance; interest is capped on the upside, but insurers can’t give less than 0% interest in the event of a down market.
For example, the S&P 500 rose 20% in one year, and you have an indexed universal life whose cap is 10%. The indexed universal life receives 10% credit. Conversely, if the S&P 500 dropped 20%, you are credited 0%.
9 Best Reasons to Buy Indexed Universal Life
- The principal of your cash value in the indexed universal life is never at risk.
- If an indexed universal life is properly funded, it can create a very unique retirement asset. Investors with good cash flow and in high tax brackets benefit the most from the cash accumulation potential due to the tax benefits.
- The costs of an indexed universal life policy consist of two sections. If you pay a monthly premium of $400 per month, $100 per month would be allocated for the cost of insurance while $300 goes into the index.
- Overfunding your policy can be more beneficial. If you increase your premium to $1,000 each month, the cost of the insurance remains at $100 per month and $900 goes into cash value. If the index achieves a 14% rate of return, then your $900 increases by $120 and pays for your insurance.
- Another advantage of an indexed universal life policy is that you can borrow money from it without a tax penalty.
- An Indexed Universal Life policy can help you leave a legacy to pass on to your heirs by giving them as much of your estate as possible, while making sure your tax and other obligations are satisfied.
- You also get a guaranteed minimum interest rate with some indexed universal life policy. So while you’re taking advantage of the market going up, you’ll never suffer losses due to the market going down.
- The death benefit gives you peace of mind knowing that your loved ones will not face financial hardship should you die. And the value can grow with your family and your needs.
- You have true asset protection!
Costs and Fees of Indexed Universal Life
IUL insurance costs are considerably higher than term insurance.
The comparison, however, should not be made between the cost of term insurance and the cost of maintaining the IUL death benefit.
The comparison should be made between the cost of the insurance component of the IUL versus the myriad of taxes and fees that traditional stock market investments will include.
Insurance costs on an IUL policy are absolutely considerable, especially in the first few years that one holds the policy.
The IUL is being used for long term gains, and over time the insurance costs associated with an IUL policy will be far less than fees charged by advisors or loads required by some mutual funds.
In addition the growth and access to the cash value of an IUL is completely tax free.
The savings on taxes alone completely neutralizes the fees required for the benefit of the policy.
Dividends do not credited to the IUL cash Value
It is true that dividends do not get credited to the IUL cash value.
This is also true of any safe investment alternative suggested by most financial advisors.
CDs, bonds, etc. do not offer a dividend payment.
It is important to remember that IUL is used in the retirement income plan that we develop as a safe money alternative.
It does not deliver a dividend, but is an asset that will deliver rates of return that have historically performed within 1% to 1.5% of major market indices.
Why Indexed Life Insurance Insurance is not an investment
Insurance is not the same as investing in a stock or mutual fund.
Cash value insurance, such as IUL, is an asset that is wholly owned by the individual.
Therefore insurance should not be considered an investment but rather the acquisition of an asset that will have guaranteed growth over a specific period of time.
IUL cash value is an asset that grows at a significantly higher rate than any money market fund or CD.
IUL, therefore, should be considered more of a real estate investment in an area where property value is protected from any loss.
Ultimately an IUL performs like a high yielding savings account for the owner.
Using Indexed Universal Life Insurance as a great alternative to traditional 529 college savings programs
Indexed universal life insurance is a great way to start a savings account for children as young as 2 weeks old.
Due to the tax-free benefits the IRS has allowed permanent life insurance to offer, it’s important to consider the impact it can have when the cost of insurance is at its lowest.
This means that you can put more premium dollars allocated to growth than death benefit.
Indexed Universal Life policy started on an infant at $100 / month turns into $1,400,000 in cash value at age 66.
Best Indexed Universal Life Insurance
Lots Of People Think They Hate Life Insurance
Often what they hate is the confusion or the annual price tag that accompanies their existing policy.
Those are the circumstances, not the facts.
The fact is that life insurance is one of the most underutilized assets in every individuals portfolio.
On paper, in black and white, it performs better than just about any stock you’ll ever purchase.
When life insurance is structured correctly, the internal rates of return are exceptional.
Mintco Financial Indexed Universal Life Insurance Specialists
Please reach out to us for more information on indexed universal life insurance and how it might work for you.