Permanent life insurance, which offers not only a death benefit, but also the potential for cash value growth in the policy, can play a key role in retirement. Sales of index universal life (IUL) insurance, a type of permanent life insurance, have risen recently. This is perhaps due to the fact that IUL offers so many attractive features. Potential growth in cash value is linked to market index performance, with guaranteed floors to protect against loss in down markets.
IUL insurance is designed to facilitate not only tax-deferred growth, but also tax-free income (based on current tax law) when distributions are properly structured. It’s important to always consult a qualified tax expert when evaluating individual circumstances – and it’s crucial, as well, to know that just as people have multiple, evolving needs, multiple types of IUL insurance are available. For example, one type of IUL insurance product is designed to offer growth and income potential. This type of robust solution may be most attractive to people ages 35-55 who are seeking accumulation as well as multiple options to optimize income distribution. Accessed cash value from an IUL insurance product can be used for any purpose, such as:
- supplemental retirement income
- cover health care expenses
- start a business
- pay for college or wedding expenses
- fund a vacation
- create emergency funds.
Another type of IUL insurance product focuses on guarantees while offering the potential for cash value growth and income. This type of solution may be most appropriate for people ages 40-70 who are seeking death benefit protection for income replacement, wealth transfer or estate planning.
Solutions with Utility
Some IUL policies also feature integrated or optional riders designed to further transform the products into “life insurance you don’t have to die to use.” Even affluent people may appreciate the potential to access living benefits, in the form of an accelerated portion of the policy’s death benefit, in the event of a chronic illness (permanent or not) or longevity (and given that the terms of the contract have been met).
With its many opportunities for customization, IUL insurance sometimes has been described as having lots of “moving parts” – and although the product is indeed built for performance potential, understanding the distinctive choices and how they are designed to work doesn’t have to be complicated.
In fact, new online educational resources have been introduced to help explain the impacts that various situations and contingencies may have on retirement readiness, and how an IUL insurance policy, along with built-in or available riders for various needs, may serve as a solution.