Riding Out Market Fluctuations: How Does Indexed Universal Life Insurance Hold Up?

Indexed universal life insurance (IUL) is a permanent life insurance policy that provides a death benefit and potential to build up internal cash value [1] when properly funded. A portion of your cash value may be credited interest based on index crediting strategies, as well as having access to fixed interest crediting strategy. The policyholder has the control and flexibility as to the allocation of interest crediting strategies.

Now, how might market fluctuations affect an IUL policy? Here’s a brief look at what may happen to an IUL when the markets:

RISE: A market surge can offer accumulation value growth for IUL policies through the indexed account portion of your policy and can be credited based on the participation rate (the percentage of the index change used in the calculation of index credit).

Note: The interest credited may be limited by caps and participation rates, depending on the index crediting method selected.

FALL: In a down market, your accumulation value is protected by a minimum zero-percent crediting floor (meaning your interest credit can’t go lower than zero based on negative market index returns). A fixed account offering is also an option; a fixed account offers the policy owner a fixed rate of interest as declared by the company.

The guaranteed death benefit of the IUL helps to protect your loved ones from the financial consequences of your passing, as long as premiums are paid. The interest crediting on the policy and the influences of the market could provide the IUL policy with accumulation value to help supplement your retirement, college funding or financial emergencies.