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Life Insurance
Life Insurance: What is an IUL?
An IUL policy stands for “Indexed Universal Life” policy. There are many different types of insurance policies, and choosing one that’s right for you can seem difficult. Before we explain IUL insurance policies, let’s talk a bit more about insurance in general.
Types of Life Insurance
Different types of insurance can help you in different ways. You may find certain types of life insurance more beneficial than others, depending on your situation and needs.
Term Life Insurance
With term life insurance, the benefits are available to you for a certain period of time. As an example, a 2o-year term life insurance policy requires monthly or annual payments for 20 years. In return, the insurance company agrees to provide death benefits (or, if you have a policy such as an IUL, other benefits) if you pass away at any point during those 20 years. Additionally, some term policies actually use a specific age, rather than the number of years, when setting the time period for the policy. For example, you could have a term life insurance policy that provides a death benefit up until the age of 90. In some cases, you may be able to receive some benefit if you outlive the policy. However, not all policies offer this.
Permanent Life Insurance
With term life insurance, you don't receive a death benefit if you outlive the policy term. Permanent life insurance policies work differently. With this type of policy, you pay a set premium each year, and your account builds a cash value. You may also receive a dividend or an interest rate, depending on the insurance company and the product. Permanent life insurance is the category that includes whole life, variable universal life, and IUL policies. There are other benefits that make permanent life insurance appealing to some. Unlike with term life insurance, you can't outlive the benefit. You can be sure that the people you want to leave money to will receive that money. Additionally, the death benefit can sometimes be tax-free* and not require probate court in order to receive. Furthermore, permanent life insurance policies are often used in conjunction with trusts, as part of one overall estate plan.
What is an IUL?
An IUL policy is a type of insurance policy that offers a death benefit, but also offers several additional benefits. This is because it’s a “universal” life insurance policy. With an IUL, you can take advantage of stock market returns, without your money being at risk. The principal of an IUL is guaranteed**, while the interest rate is based on market conditions. This may be the best of both worlds.
There are many ways that an IUL can be beneficial to your overall retirement strategy. Because your money is held by the insurance company, your cash value is protected. You can choose to tie your rate of return to an index, allowing your IUL cash value to gain a reasonable rate of return, over time. Your policy’s cash value will increase when certain indexes do well, while protecting your money from losses.
Could You Retire Tax-Free With an IUL?
To help determine whether an IUL could be the right option for you, we’ve put together some questions to ask yourself. If any of these questions make you question your current strategy, consider reaching out to us. We can help you learn more about potentially tax-free* retirement options.
- Do you believe that taxes will be higher in the future?
- If so, do you believe that you should start preparing now?
- Do you have a way to offset higher taxes in retirement, as part of your overall strategy?
- Do you have any tax-free* money set aside?
- What will the tax burden be for your beneficiaries?
- Do you have a way to minimize those taxes for them?
- Given the choice, would you rather pay taxes on some of your money today, or pay potentially higher rates for it in the future?
What's Your Strategy?
Whether you’re looking for protection for your family, you have questions about retirement, or if you simply want to learn more about financial and insurance options, reach out to us. Safety First Money Group is here to help. Let’s work together towards your financial future.
