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Setting Up Indexed Universal Life Insurance: A Comprehensive How-To


If you’re wondering how to get an index universal life insurance (IUL) policy, you’re in the right place. Here’s a quick answer to your question:

Steps to Get an Index Universal Life Insurance:
1. Determine your financial goals and needs.
2. Consult with a financial advisor.
3. Choose your desired coverage and index options.
4. Complete a medical and financial evaluation.
5. Submit your application for approval.

Indexed Universal Life Insurance (IUL) combines life insurance coverage with the potential for cash value growth tied to stock market indexes. It’s a versatile option for those seeking both protection and investment growth.

IULs offer permanent life insurance that can last a lifetime and provide a death benefit to your beneficiaries. The cash value component of the policy grows based on a chosen index like the S&P 500, providing the potential for higher returns than traditional whole life policies. However, it’s crucial to remember that while you can benefit from market gains, you won’t directly invest in the stock market, reducing overall risk.

Why is understanding IUL important? Simple. This type of insurance can play a key role in ensuring financial security for your family, offering both a safety net and an investment vehicle. Unlike term life insurance, which lasts for a specific period, IUL gives you the flexibility to adjust premiums and potentially increase your cash value over time.

IUL Infographic - how to get an index universal life insurance infographic pillar-5-steps

Grasping the basics of IUL will help you make informed decisions that align with your financial goals and future security needs. Let’s dive deeper into what Indexed Universal Life Insurance involves and how you can set it up properly.

What is Indexed Universal Life Insurance?

Indexed Universal Life Insurance (IUL) is a type of permanent life insurance that combines a death benefit with a cash value component. Unlike term life insurance, which provides coverage for a specific period, IUL offers lifelong protection as long as premiums are paid.


IUL is a flexible and versatile life insurance policy. It allows you to allocate a portion of your premium payments to a cash value account that earns interest based on the performance of a chosen stock market index, such as the S&P 500. This means your cash value can grow as the market does, but with certain protections in place.

Permanent Life Insurance

One of the key features of IUL is that it is a permanent life insurance policy. This means it provides coverage for your entire life, not just a set term. As long as you keep up with your premiums, your beneficiaries will receive a death benefit when you pass away.

Cash Value

The cash value component of an IUL policy is what sets it apart from other types of life insurance. Here’s how it works:

  • Interest Earnings: The cash value earns interest based on the performance of a selected stock market index. However, the policy is not directly invested in the stock market, so you won’t lose cash value if the index performs poorly.

  • Minimum Interest Rate: IUL policies usually have a guaranteed minimum interest rate, which means your cash value will still grow even if the market does not perform well.

  • Cap on Gains: While there is a minimum interest rate, there is also a cap on the maximum returns you can earn. This cap typically ranges from 8% to 12%.

Death Benefit

The death benefit is the amount paid to your beneficiaries when you pass away. With an IUL policy, you have some flexibility in adjusting the death benefit amount, which can be particularly useful if your financial needs change over time.

Example: Suppose you initially set a death benefit of $500,000. As your financial situation evolves, you might decide to increase or decrease this amount to better align with your current needs.

Key Takeaway: IUL combines lifelong coverage with the potential for cash value growth through equity index performance. This makes it a unique option for those looking to balance life insurance protection with investment opportunities.

Next, we’ll explore how to set up an Indexed Universal Life Insurance policy, including eligibility requirements, necessary documents, and choosing the right index.

How to Get an Indexed Universal Life Insurance Policy

Setting up an Indexed Universal Life Insurance (IUL) policy can seem complex, but it doesn’t have to be. Here’s a step-by-step guide to help you understand the process:


First, determine if you’re eligible for an IUL policy. Generally, anyone in good health between the ages of 18 and 85 can apply. However, your health status, lifestyle, and family medical history can affect your eligibility and premium rates.

Required Documents

To apply for an IUL policy, you’ll need to gather several documents. These typically include:

  • Identification: A government-issued ID like a driver’s license or passport.
  • Proof of Income: Recent pay stubs, tax returns, or bank statements to verify your income.
  • Medical Records: Your health history, including any medications or treatments you’ve received.
  • Beneficiary Information: Details about who will receive the death benefit.

Choosing an Index

One of the unique features of an IUL policy is that its cash value is tied to the performance of a stock or bond index. Common choices include the S&P 500 and the Nasdaq-100.

Steps to Choose an Index:

  1. Research: Understand the historical performance and volatility of different indices.
  2. Consult an Expert: Speak with a financial advisor to determine which index aligns with your financial goals.
  3. Consider Caps and Floors: Each index option will have caps (maximum earning limits) and floors (minimum guaranteed interest). Make sure you understand these limits.

Why Choose Tigner Financial?

At Tigner Financial, we specialize in helping clients navigate the complexities of life insurance. Our experienced agents provide personalized advice to ensure your policy aligns with your financial goals.

Benefits of Choosing Tigner Financial:

  • Expert Guidance: Our agents are knowledgeable and can help you understand the intricacies of IUL policies.
  • Tailored Solutions: We offer customized plans that fit your unique needs and financial situation.
  • Transparency: We pride ourselves on clear, straightforward communication, so you’ll always know what to expect.

For more information on how to get an indexed universal life insurance policy, visit our Life Insurance Services page.

Next, we’ll dive into the key features of Indexed Universal Life Insurance, including flexible premiums and interest rate guarantees.

Key Features of Indexed Universal Life Insurance

Flexible Premiums

One of the standout features of Indexed Universal Life Insurance (IUL) is its flexible premiums. Unlike traditional policies with fixed premiums, IUL allows you to adjust your payments based on your financial situation.

Why is this important?

  • Financial Flexibility: If you have a tight month financially, you can lower your premium. Conversely, if you have extra funds, you can increase your payment to build more cash value.
  • Avoiding Policy Lapse: Skipping or underpaying premiums is possible, but the cost of insurance and policy expenses will be deducted from your cash value. This helps avoid policy lapse.

Equity-Indexed Account

The cash value in an IUL policy can be tied to the performance of a stock or bond index like the S&P 500. This means your cash value can grow based on market performance.

How does it work?

  • Indexed Accounts: Your cash value is placed in sub-accounts that mirror the performance of an index. If the index performs well, your cash value grows.
  • Fixed Accounts: Alternatively, you can choose a fixed account that grows at a set interest rate. This is less risky but offers lower growth potential.

Interest Rate Guarantee

One of the significant benefits of IUL policies is the interest rate guarantee. This ensures that your cash value will grow at a minimum rate, even if the market performs poorly.

  • Floor Rate: Typically set at 0%, this means your cash value won’t decrease even if the market takes a downturn.
  • Guaranteed Growth: This feature provides a safety net, ensuring your investment grows at least at the guaranteed rate.

Cap and Floor Rates

Caps and floor rates are essential to understanding how your cash value can grow in an IUL policy.

  • Cap Rate: This is the maximum interest rate your account can earn. For example, if your cap is 10% and the index rises by 15%, you will only earn 10%.
  • Floor Rate: This is the minimum interest rate your account will earn, usually set at 0%. This protects your cash value from negative market swings.

Why are these important?

  • Risk Management: Caps limit how much you can earn in a booming market, while floors protect you from losing money in a downturn.
  • Balanced Growth: These rates ensure a balanced approach to growing your cash value, providing both potential growth and protection.

Next, we’ll look at the advantages and disadvantages of Indexed Universal Life Insurance to help you decide if it’s the right fit for your financial goals.

Advantages and Disadvantages of IUL Insurance

When deciding if Indexed Universal Life (IUL) insurance is right for you, weigh the pros and cons. Here are the advantages and disadvantages to help you make an informed decision.


Flexible Premiums

One of the standout features of IUL insurance is the ability to adjust your premium payments. This flexibility can help manage cash flow over time, making it easier to increase contributions when you can afford it and decrease them during tighter financial periods.

Cash Value Accumulation

The cash value in an IUL policy grows tax-deferred, based on the performance of a chosen equity index. This means you don’t pay taxes on the gains as they accumulate, which can be a significant financial resource during retirement.

Investment Flexibility

IUL policies allow you to choose from various equity indexes, tailoring your investment to match your risk tolerance and financial goals. This flexibility can help optimize your returns based on your personal investment strategy.

Death Benefit

IUL policies provide a permanent death benefit, which is generally passed on to beneficiaries tax-free. This benefit can support your loved ones financially when you’re no longer around, providing peace of mind.

Less Risk

Compared to direct investments in the stock market, IULs offer a lower-risk option because they provide a floor that protects against market downturns. This ensures that your cash value won’t decrease due to negative market performance.

Easier Distribution

The cash value in IUL policies can be accessed at any time without penalty, regardless of your age. This makes it easier to use these funds for retirement or other financial needs.

Unlimited Contribution

IUL insurance policies have no limitations on annual contributions, allowing you to increase your cash value without restrictions. This is particularly advantageous for those who wish to maximize their savings.


Caps on Accumulation Percentages

Insurance companies often set a maximum participation rate that is less than 100%. This cap can limit the growth potential of your policy’s cash value, especially in booming market conditions.

Better for Larger Face Amounts

Smaller policy face values don’t offer much advantage over regular Universal Life (UL) insurance policies. IULs are more suitable for those who can afford larger premiums to accumulate significant cash value.

Based on a Variable Equity Index

The performance of your cash value is tied to the equity index, which can vary. If the index performs poorly, your returns will be affected, albeit protected from a complete loss by the policy’s floor.

Excludes Stock Dividends

Unlike direct stock investments, IULs do not benefit from dividends paid by companies. This could mean missing out on potential profits during high-performing years for the underlying index.

Management Fees

IUL policies can come with higher premium, administration, and commission fees compared to other types of life insurance policies. These fees can significantly impact the overall cost and efficiency of your investment.

Understanding these advantages and disadvantages is crucial in determining whether an IUL policy is the right choice for your financial strategy. Each aspect offers insights into how indexed universal life insurance works and its potential impact on your financial planning.

Next, we’ll address some frequently asked questions about IUL insurance to further clarify its benefits and limitations.

Frequently Asked Questions about Indexed Universal Life Insurance

How Much Does IUL Cost?

The cost of an Indexed Universal Life (IUL) insurance policy can vary widely based on several factors:


Generally, the younger you are, the lower your premiums will be. Here’s a quick breakdown for a $250,000 coverage:

  • Male aged 25 to 35: $96 – $122 per month
  • Male aged 35 to 45: $122 – $171 per month
  • Male aged 45 to 55: $171 – $303 per month
  • Male aged 55 to 65: $303 – $491 per month

For women, premiums are typically lower due to longer life expectancy:

  • Female aged 25 to 35: $71 – $96 per month
  • Female aged 35 to 45: $96 – $148 per month
  • Female aged 45 to 55: $148 – $238 per month
  • Female aged 55 to 65: $238 – $445 per month


Women generally pay less than men because they tend to live longer. For example, a healthy 35-year-old woman might pay around $250/month for a $500,000 policy, whereas a man of the same age and health status might pay closer to $300/month.

Health Status

Your health status significantly impacts your premium. Healthier individuals get lower rates, while pre-existing conditions can increase costs. A medical exam is usually required to assess your health status. Conditions like high blood pressure, diabetes, or a history of smoking can lead to higher premiums.

Where is the Best Place to Get an IUL?

When looking for the best place to get an IUL, consider companies with high ratings for financial strength and customer satisfaction.

Top IUL Companies:
Pacific Life
Guardian Life

These companies have earned at least 4 stars out of 5 for overall performance. Ratings are based on consumer experience, complaint data from the National Association of Insurance Commissioners, and financial strength ratings.

Pacific Life: Known for strong financial stability and good customer service.
Guardian Life: Offers a range of flexible options and has a good track record for paying claims.
Nationwide: Provides comprehensive coverage options and has a solid reputation for customer satisfaction.

Can You Lose Money in an IUL Policy?

Principal Protection:
It is unlikely you will lose money in an IUL because insurance providers set a guarantee for your principal to protect it against losses in the market.

Market Losses:
While you may not lose any money if the market index goes down, you won’t earn interest either. This means that in a bearish market, your cash value won’t decrease but it won’t grow either.

Cap on Earnings:
IUL policies often have a cap on the maximum amount you can earn. For example, if your policy has an 11% cap, even if the market index performs better, your growth is limited to 11%. This cap can limit your earnings during particularly good market years.

Understanding these aspects can help you make an informed decision about whether an IUL policy aligns with your financial goals and risk tolerance.

Next, we’ll dive deeper into the key features of Indexed Universal Life Insurance to further explain its benefits and limitations.


Choosing the Right Policy

Selecting the right Indexed Universal Life (IUL) insurance policy is crucial for your financial future. It starts with understanding your own financial goals, risk tolerance, and long-term plans. Here are a few steps to guide you:

  1. Assess Your Needs: Determine the amount of coverage you need and for how long. Consider your family’s financial needs, debts, and future goals.

  2. Understand the Costs: Be aware of the fees associated with IUL policies, including administrative expenses and potential charges for policy lapses.

  3. Evaluate the Risks: Understand the market risks and how they can affect your cash value. Know the caps and floors that can impact your returns.

  4. Consult an Expert: Work with a knowledgeable life insurance agent or financial advisor who can explain the intricacies of IUL and help you make an informed decision.

Tigner Financial’s Expertise in Whole Life Insurance

At Tigner Financial, we specialize in helping clients navigate the complexities of life insurance. Our experienced agents are here to provide personalized advice and ensure that your policy aligns with your financial goals.

We pride ourselves on our ability to simplify complex topics and offer clear, actionable insights. Whether you need help understanding how indexed universal life insurance works or comparing different types of policies, we are here to support you every step of the way.

Explore more about our services and how we can assist you in choosing the right life insurance policy for your needs. Visit our Life Insurance Services page to learn more and get started today.

Choosing an IUL policy can be a strategic move for securing your financial future, but make an informed choice. Let Tigner Financial be your trusted partner in this journey.

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