Indexed Universal Life Insurance
Upside Potential With
Indexed Universal Life (IUL) insurance is permanent life insurance that offers a death benefit and the ability to build cash value. What sets IUL apart are its interest crediting options. They include:
- A guaranteed fixed rate of interest, and
- Interest based in part on one or more market indices such as the Standard and Poor’s 500® (S&P®)
A cap is typically placed on the credited rate of interest, and a minimum 0% floor helps guard against market-based losses.
If you want less risk than a variable universal life policy but greater cash value potential than a universal life policy, an IUL policy may be right for you.
Key Benefits of Indexed Universal Life Insurance
- Permanent death benefit coverage
- Upside cash value potential with downside protection
- Optional features (riders) to customize your coverage
- Flexibility to increase or decrease your planned premiums within certain limits
- Ability to access your cash value through tax-advantaged loans and withdrawals1
How Does Indexed Universal Life Insurance Work?
- You pay premiums.
- Premium charges, taxes and any rider fees are deducted from your premium.
- The net premium is applied to a fixed account that is credited a fixed rate of interest subject to a guaranteed minimum.
- A percentage of your fixed account value, which you define, can be transferred to an index account. Your index account is credited interest equal to the index growth rate.
- Monthly insurance costs are deducted from the cash value. Unpaid loans plus interest and withdrawals will also reduce the death benefit and cash value.
As long as cash value is available, the policy remains in force.
- The death benefit – minus any outstanding policy loans and interest due – is paid to your beneficiaries at death.
Indexed Universal Life Choices from The Hartford
1 Both loans and withdrawals from a permanent life insurance policy may be subject to penalties and fees and, along with any accrued loan interest, will reduce the policy's account value and death benefit. Assuming a policy is not a Modified Endowment Contract (MEC), withdrawals are taxed only to the extent that they exceed the policyowner's cost basis in the policy and usually loans are free from current federal taxation. A policy loan could result in tax consequences if the policy lapses or is surrendered while a loan is outstanding. Distributions from MECs are subject to federal income tax to the extent of the gain in the policy and taxable distributions are subject to a 10% additional tax prior to age 59½, with certain exceptions.