Life Insurance

Indexed Universal Life (IUL)

A permanent life insurance policy whose cash value grows based on the movement of a market index, subject to a cap on gains and a floor that limits losses.

IUL combines a death benefit with a cash value component credited according to an index, rather than being invested in the index directly. Gains are limited by a cap or participation rate, and losses are limited by a floor.

It is a genuinely complex product with real costs and long surrender periods, and it is frequently sold to people it does not fit. The guides cover both what it does well and where the criticism is fair.

Related Terms

Death Benefit

The amount a life insurance policy pays to the named beneficiaries when the insured dies. It generally passes income-tax-free and outside probate.

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