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Who is a Good Fit for an IUL Policy?

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Reviewed By: Rob Pinner

Rob Pinner Rob Pinner is the founder and CEO of Pinner Financial Services servicing all 50 states. Rob started his insurance career in 2002.

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Fact Check By: Holly Mitchell

Holly Mitchell’s background in life insurance insurance goes back to 1985 when she worked for her father who was a New York Life agent. Holly has a marketing degree from Auburn University and has had a life insurance license since 2008. In addition to advising life insurance for customers all around the country, Holly is our website fact checker.

Indexed Universal Life (IUL) solutions are widely regarded as the fastest-growing segment within the insurance industry. Not only does this type of life insurance typically offer affordable premiums and guaranteed death benefits, but it also offers downside protection from market losses and tax benefits.

When should a client consider an IUL policy? People who want to protect wealth or high-income earners. If a client owns a business or if they’re looking for college savings funds, then an IUL could be a great option. With no contribution limits and tax-deferred growth, IULs can be very appealing to those who see the obvious benefits. Who is the target segment? People with wealth to protect or high-income earners

An IUL plan offers a lower-risk option like that of a fixed indexed annuity. Unlike other investments, IULs can provide better returns than other fixed-rate options during a strong market, and can also offer protection against losses due to the index falling.

A client who is averse to taxes and is looking to invest for the long-term would be wise to consider an IUL as part of their retirement strategy. There are options available for clients who want to capture more of the upside performance of the market yet have immunity to the downside.

Who is Best Suited for an Indexed Universal Life Insurance Policy?

  • Middle to high-income individuals who prefer a life insurance policy that will last their entire life and build considerable wealth that can be converted to a non-taxable income stream.
  • Individuals who prefer a flexible investment/life insurance product that will accommodate life events that are likely bound to happen.
  • Young and healthy adults who want to start saving for retirement without the constraints of traditional retirement-planning products.
  • Those who will likely max out traditional retirement planning products and are looking for considerably lower tax liability in their retirement years.
  • Parents of children who will likely attend college and will need a parent to subsidize the cost of attending a college of their choosing.
  • Couples who are looking for supplemental retirement income or want income replacement while enjoying their retirement. And, who wants to have access to emergency funds if a financial situation should arise.
  • Individuals who want to participate in the market without being subject to losses when the market underperforms.
  • Individuals who will likely not max out an employer-sponsored plan such as a 401(k) that provides matching funds from their employer.

Who Should Probably Stay Away from Indexed Universal Life Insurance?

  • Older individuals who do not have the time to accumulate enough wealth that would establish a tax-exempt income stream during retirement.
  • People with severe or multiple health conditions that would medically disqualify them from getting a rate class that is standard or better.
  • Young adults with families who need a large death benefit to replace their income in the event of their death
  • Individuals who are unwilling to invest in their IUL over the long term so that the cash account can build substantial wealth.
  • Individuals who are unwilling to invest in life insurance because of its complexity, management, and surrender fees.
  • People who are not concerned about their income tax liability during retirement.
  • Individuals who have no need for life insurance

Frequently Asked Questions

Middle to high income earning individuals that are looking for life insurance protection and the ability to save for retirement in a tax-efficient manner.

High earner not rich yet.  A segment of population that are looking for alternative ways to save for retirement.

Your savings and your life insurance will pass on to your beneficiary tax free.

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