What Is Indexed Universal Life Insurance and How Does It Work?

This permanent life insurance provides a death benefit to your beneficiaries but also offers a cash-value component that can grow over time.

A young couple looks over life insurance paperwork at the kitchen table.
(Image credit: Getty Images)

Editor’s note: This is part one of a two-part series about indexed universal life insurance and how it can be used in retirement planning. Part one explains indexed universal life (IUL) policies and how they work. Part two, Retirement Planning With Life Insurance, explores three ways an IUL could be used to generate retirement income.

Life insurance is often put into two groups. You’ve got term life insurance, which has no cash value unless you pass. Or you’ve got whole life insurance, which has a cash value, but you’ve got to keep paying those premiums for life. There’s another type of life insurance that you can consider that offers funding flexibility and a cash-value component — universal life insurance.

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Mike Decker, NSSA®
Author, Wealth Planner and Money Manager, Kedrec LLC

Mike Decker is the author of the book How to Retire on Time, creator of the Functional Wealth Protocol, and the founder of Kedrec, a Registered Investment Advisory firm located in Kansas that specializes in comprehensive wealth planning and management at a flat fee. He specializes in creating retirement plans designed to last longer than you™, without annuitized income streams or stock/bond portfolios. In addition to helping people achieve their financial goals, Decker continues to act as a national coach to other financial advisers and frequently contributes to nationally recognized publications.