Index Universal Life (IUL) Insurance: Protection + Wealth Building

connecttocoverage
Sep 7
2 min read

Why IUL Insurance Is Gaining Popularity

When it comes to life insurance, many families want more than just a death benefit. Index Universal Life (IUL) insurance combines the protection of permanent life insurance with the potential to build tax-advantaged savings.

This makes IUL a smart choice for people who want to protect their loved ones and grow wealth over time.

What Is Index Universal Life Insurance?

IUL is a type of permanent life insurance that:

Provides a death benefit to your beneficiaries.
Builds cash value that grows based on the performance of a stock market index (like the S&P 500).
Offers flexible premiums—you can increase or decrease payments depending on your financial situation.

Unlike investing directly in the market, IUL policies have floors and caps, meaning your cash value won’t lose money if the index performs poorly, but growth is limited when the market is booming.

Average Costs of IUL Insurance in 2025

The cost of IUL is typically between term and whole life insurance. While exact rates vary, here’s an estimate for a healthy, non-smoker buying a $500,000 policy:

Age	Female (Non-Smoker)	Male (Non-Smoker)
30	$250–$300/month	$280–$340/month
40	$360–$420/month	$420–$480/month
50	$580–$650/month	$640–$720/month

Key Insight: IUL costs more than term but usually less than whole life.

Benefits of IUL Insurance

Lifelong Coverage: Your policy never expires (as long as premiums are paid).
Cash Value Growth: Tied to an index like the S&P 500—offers growth potential with downside protection.
Tax Advantages: Cash value grows tax-deferred, and withdrawals may be tax-free if structured properly.
Flexible Premiums: Adjust your payments based on your financial situation.
Retirement Supplement: Many use IUL as a tool to create tax-free retirement income.

Risks and Drawbacks of IUL

Complexity: More complicated than term or whole life policies.
Caps on Growth: Even if the market gains 15%, your policy might only credit 8–10%.
Higher Costs than Term: IUL is not the cheapest way to get life insurance coverage.

IUL vs. Whole Life vs. Term Life

Feature	Term Life	Whole Life	Index Universal Life (IUL)
Coverage Length	10–30 years	Permanent	Permanent
Cash Value	❌ None	✅ Guaranteed, fixed growth	✅ Linked to stock index performance
Premiums	Low	High	Mid-range
Flexibility	❌ No	❌ Limited	✅ Flexible premiums & death benefits
Best For	Budget-conscious families	Long-term planners	People seeking both coverage & growth

Example: How IUL Works in Practice

Imagine a 35-year-old invests in an IUL policy with $500,000 coverage:

She pays $300/month in premiums.
Over 30 years, her cash value grows alongside the S&P 500, with a floor of 0% and a cap of 9%.
By retirement, she could withdraw or borrow against her cash value to supplement her income—all while keeping her life insurance protection.

Bottom Line

Index Universal Life insurance is a hybrid solution—offering both lifelong protection and investment growth potential. While it’s not as cheap as term life, it provides more flexibility and opportunities than whole life.

At Connect to Coverage, we guide families through IUL options to ensure you find the policy that fits your needs and long-term goals. Request your personalized quote today.