Understanding indexed universal life insurance policies
These complex financial instruments are useful for executive retention and as corporate investments.
Indexed universal life policies have multiple applications in credit unions and other businesses. These types of products are often used in key employee retention strategies and as corporate investment vehicles. While IUL sales growth has been rapid over the last decade, clients often misunderstand how the crediting mechanism on these policies works, and the economic factors that impact the product. Below, we describe how it operates, the potential benefits and important factors to consider when evaluating a purchase.
Understanding IUL Crediting
IUL insurance policies are permanent life insurance contracts with both cash value and death benefit components. IUL can be designed with the primary goal of efficient cash accumulation, provision of a death benefit or a blend of objectives. Several terms are used when describing IUL crediting, and knowing their meaning is essential to understanding how they work.
- Floor. The minimum rate the policy’s cash value will be credited.
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