Index Universal Life (IUL)

Index Universal Life Insurance (IUL): Build Wealth and Protect Your Future

What Is Index Universal Life Insurance?

Index Universal Life Insurance (IUL) is a type of permanent life insurance that offers both a death benefit and a cash value component that grows based on the performance of a market index, such as the S&P 500. It combines financial protection with the opportunity for tax-advantaged growth—without direct investment in the stock market.

Unlike term life insurance (which only lasts for a set number of years), IUL policies are designed to last your entire life and provide flexibility, growth potential, and long-term benefits.

How It Works

• You pay premiums into the policy.
• A portion of the premium covers the cost of the life insurance.
• The remainder goes into a cash value account, which earns interest based on an index (like the S&P 500).
• Your principal is protected with a 0% floor, meaning you won’t lose money during market downturns.
• Gains are often capped (e.g., 10–12% per year) but come with no downside risk.
• You can borrow against the cash value tax-free through policy loans.

Example: How an IUL Can Work

James, age 35, purchases a $500,000 IUL policy.

• He pays $500/month in premiums.
• Over time, his policy accumulates $100,000 in cash value.
• The S&P 500 grows 8% in a year. His policy earns 8% (subject to a 10% cap).
• When the market drops -15%, his account earns 0%, but suffers no loss.
• At age 55, he takes a tax-free policy loan of $25,000 to help pay for his daughter’s college tuition.

Real Story: How Walt Disney Used Life Insurance to Fund Disneyland

When Walt Disney was denied funding from banks to build his dream theme park—Disneyland—he turned to a more reliable source: his life insurance policy.

He borrowed against the cash value of his permanent life insurance to fund the early development and land acquisition for Disneyland in the 1950s. This bold move showed how life insurance can be a source of liquidity and funding when traditional financing is unavailable.

Walt’s decision not only helped bring Disneyland to life but also demonstrated the power of leveraging life insurance as a financial asset.

Pros and Cons

Pros

• Lifetime coverage – unlike term insurance, IUL lasts your entire life
• Tax-free loans – borrow from the cash value without taxes
• Principal protection – you won’t lose value when the market drops
• Tax-deferred growth – earnings accumulate without being taxed
• Flexible premiums – you can adjust payments over time
• Estate planning tool – provide legacy benefits to heirs

Cons

• Caps on gains – limits the maximum growth per year
• Complex structure – requires education to understand features
• Fees and charges – cost of insurance and administration can reduce cash value
• Loans reduce death benefit – if unpaid, they reduce what’s passed to beneficiaries

Frequently Asked Questions

1. Is the money in my IUL invested in the stock market? No. Your cash value is not directly invested. It grows based on the performance of an index, with protection from losses.

2. Can I lose money in an IUL? No. Most IULs have a floor of 0%, so in years where the index performs poorly, you earn nothing but don’t lose your principal.

3. When can I access the money? You can access your policy’s cash value after it accumulates—usually after a few years—via policy loans or withdrawals.

4. Are policy loans taxable? No, as long as the policy remains in force. Loans are tax-free but must be repaid to preserve the death benefit.

5. What happens if I stop paying premiums? If your cash value is sufficient, it can cover premiums for a time. If not, the policy may lapse unless you resume payments.

Who Is an IUL Good For?

• Professionals and business owners looking for tax-free retirement income
• Parents wanting to build a family legacy
• People seeking safe, market-linked growth without market risk
• Anyone who wants flexibility and permanent life insurance in one plan

Key Terms

Term	Description
Index	A financial benchmark like the S&P 500 used to track market performance
Cap	Maximum annual interest credited (e.g., 10%)
Floor	Minimum interest rate credited (usually 0%)
Cash Value	Savings component within the policy that grows tax-deferred
Policy Loan	Tax-free loan taken against the cash value of the policy

Found Us Through Social Media?

If you’re here because you saw someone mention Index Universal Life Insurance (IUL) on TikTok, Instagram, YouTube, or another platform—welcome!

A lot of creators are talking about how IULs can be used for:

• Building tax-free retirement income
• Funding college or business ventures
• Protecting your family with a lifetime death benefit
• Accessing money with no market loss

Before making any decisions, it’s important to learn how it really works. This page is designed to give you the full breakdown in plain language.

If you're serious about exploring your options, go to IULPolicy.com to:

• Watch explainer videos
• Get personalized quotes
• Book a free consultation with a licensed agent

Knowledge is power. Understand the strategy before you buy the solution.

Final Thoughts

Index Universal Life Insurance is a smart, long-term financial tool for people who want to protect their families, grow their wealth safely, and access money without taxes. It’s like having life insurance, a savings account, and a retirement income strategy all in one.

Before purchasing an IUL, work with a licensed agent to understand your goals, compare carriers, and review the policy illustrations.

Related Pages

• Life Insurance Explained
• Tax-Free Retirement Strategies
• Cash Value vs Term Insurance
• How to Present IUL to Clients