IUL (Indexed Universal Life)
A permanent life insurance product with flexible premiums and cash value growth tied to a market index (e.g., S&P 500) with a floor and a cap.
Full Definition
Indexed Universal Life (IUL) is a permanent life insurance policy in the universal life family. Premiums fund a cash value account whose interest credits are tied to the performance of a market index (commonly S&P 500, Nasdaq-100, or a proprietary volatility-controlled index). IUL features a floor (typically 0%, so the cash value never loses value to market drops) and a cap or participation rate (limiting upside). Policyholders can take tax-advantaged loans against cash value, which is the basis for IUL's "tax-free retirement income" marketing angle. IUL is consultative to sell — the conversation often takes 2–3 meetings and involves illustrations. FYC commissions run 60–100%+ of target premium, making IUL highly lucrative but drawing regulatory scrutiny (NAIC AG 49-A and 49-B regulate illustration practices).
Example
A 45-year-old professional funds an IUL with $12,000/year for 20 years to build tax-deferred cash value, intending to take tax-free policy loans in retirement. Agent earns 85% FYC on $10,000 target premium = $8,500 first-year.
Related Terms
- Whole Life Insurance — Permanent life insurance with fixed premiums, guaranteed cash value growth, and a guaranteed death benefit — the product behind most Final Expense sales.
- Term Life Insurance — Pure-death-benefit life insurance covering a specified term (10, 15, 20, or 30 years), with no cash value and the lowest premiums of any life product.
- Tax-Free Retirement (TFR) — Marketing framing for IUL used as a supplemental retirement income vehicle via tax-free policy loans against cash value.
- Cash Value — The savings component of a permanent life insurance policy that accumulates tax-deferred over time and can be borrowed against or surrendered.
- Preset Appointment — A lead format where an intake agent schedules a specific date and time for the consumer to speak with the buying agent, delivered with calendar invite.