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Taylor Johnson
Indexed Universal Life

Grow with the market. Not down with it.

For the building years, especially if you don't have a 401(k) or an employer match. An IUL is permanent life insurance with a cash value account linked to a market index. The cash value grows tax-deferred, a 0% floor keeps index losses out of it in down years,1 and the policy leaves a generally income-tax-free death benefit to the people you love.2

Is an IUL right for me?Compare with annuities

Key terms

Read these once. The rest of the page uses them.

Cap
The most the insurer will credit in a period, however well the index does.
Floor
The least it will credit: 0%. Index losses aren't passed on to you.1
Participation rate
The share of the index's gain used to work out your credit.
Cash value
The savings inside the policy. It grows tax-deferred and can be borrowed against.
Policy loan
Borrowing against your cash value. Generally not taxed as income while the policy stays in force.2

The mechanism

How a premium dollar moves.

Every IUL follows the same basic path. Money comes in, part of it pays for the life insurance, and the rest builds cash value with credits tied to an index. Here it is, one step at a time.

  • Your money in the policy
  • Life insurance
  • Index credit

Schematic, not to scale.

  1. Premium

    You pay in. The amount and timing are flexible, within limits the policy sets.

  2. Protection

    Part of each premium pays for the life insurance that protects your family.

  3. Cash value

    What's left accumulates here and grows tax-deferred. It's the part you can use while you're alive.

  4. Index credit

    Credited based on an index, up to the cap. In a down year it's 0%, not a loss.1 Credited gains are locked in.

  5. Use it, or leave it

    The value leaves the policy one of two ways.

    While living

    Policy loans

    Borrow against your cash value, for any reason.2 Loans accrue interest and reduce the death benefit.

    At death

    Death benefit

    Paid to your beneficiaries, generally income-tax-free,2 less any loans outstanding.

The floor and the cap

Down years credit zero. Up years build your cash value.

This is the heart of an IUL. The 0% floor keeps index losses out of your cash value,1so a bad year for the market isn't a step backward for you. Strong years are credited up to the policy's cap.

What the index did, and what got credited

Hypothetical, twelve years

Hypothetical illustration of twelve years. In three down years the index fell and the credited interest stayed at 0%, the floor. In five strong years the index rose past the cap and the credited interest stopped at the cap. In the other years the credited interest followed the index. Compounded over time, the credited line never dips from index losses but gives up the best years; in this example the two finish close together.

Index (hypothetical)Credited, with floor and capCap
A
A down year. The index fell, but the credited rate held at 0%, so the drop is not credited against the account.1
B
A strong year. Interest is credited up to the cap.
C
Over time. The credited line never dips from index losses. In this example the two finish close together.
How a floor and cap shape credited interest. Hypothetical illustration, not actual performance.1,5

In plain English

Down year
0% credited, never a loss.1
Strong year
Credited up to the cap.
Past credits
Locked in. A later drop can't take them back.

Caps and participation rates are set by the insurer and can change over time within contract guarantees. That's one reason Taylor compares carriers carefully.

Who it's for

Built for the building years.

An IUL works best when you start early and fund it steadily, so it has years to build. It isn't for everyone, and Taylor will tell you if it isn't for you.

Often a good fit

  • No 401(k) at work, or no employer match

    An IUL can be your own way to build, with life insurance built in.2

  • Kids, families and professionals, typically ages 0 to 50

    Time is the main ingredient. The earlier you start, the longer it has to build.

  • High earners who've outgrown a Roth IRA

    There are no income limits like a Roth's. Funding is capped instead by tax rules tied to the death benefit.2

  • Parents who want lifelong coverage and a legacy

    Permanent coverage, plus something to pass on.

  • Anyone who wants growth without direct market losses

    Index losses aren't credited to your cash value.1

  • Anyone who wants living benefits

    Many policies let you use part of the death benefit early if you're diagnosed with a qualifying chronic, critical or terminal illness.

What it can do

More than a savings account.

An IUL builds cash value and protects your family at the same time. Here's what it does, and when it works best.

What it can do

  • 0% floor: index losses are never credited to your cash value1
  • Tax-deferred growth on cash value2
  • Tax-advantaged access through policy loans, with no age-59½ rule2
  • No IRS contribution limits like a 401(k) or Roth IRA
  • Generally income-tax-free death benefit for beneficiaries2
  • Many policies offer living benefits for chronic or terminal illness

Works best when

  • You start early, so the cash value has years to build
  • You don't have a 401(k), or want more than it offers
  • You can fund it steadily, monthly or yearly
  • You want protection for your family while you build
  • You'd like tax-advantaged money to use later2

The balance

An IUL rewards time, steady funding and careful design. Start early and let it build.

IUL questions

What people ask most.

Don't see yours? Bring it to a free call and get a straight answer.

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Indexed Universal Life is permanent life insurance with a cash value account. Part of each premium pays for the insurance. The rest builds cash value that earns interest tied to a market index, like the S&P 500. You get a death benefit for your family and a pool of money you can use while you're alive.

It can be one way to build. If your job doesn't offer a 401(k), or doesn't match, an IUL lets you build cash value you can use later, including in retirement. Policy loans and withdrawals are generally not taxed as income when the policy is set up correctly and stays in force. And unlike a savings account, it's also life insurance, so your family is protected while you build.

No. Your cash value isn't invested in stocks. The insurer credits interest based on how an index performs, up to a cap. If the index falls, you're credited 0% for that period instead of a loss.

Many IULs include riders that let you use part of your death benefit early if you're diagnosed with a qualifying chronic, critical or terminal illness. It's money for you, while you're alive, when you may need it most. What's available depends on the policy and riders chosen.

They're the rules for how interest is credited. The floor is the least you can be credited in a period, usually 0%. The cap is the most. The participation rate is the share of the index's gain you receive. Insurers can change caps and participation rates over time within contract limits, which is one reason Taylor compares carriers carefully.

Yes. A parent or grandparent can own a policy on a child. Starting young secures coverage while they're healthy and gives the cash value decades to grow. You control the policy while they're young, and ownership can usually be passed to them later.

Usually anywhere from birth to about age 50. An IUL is built for the long run, so the sooner you start, the more time the cash value has to grow before you use it.

Through policy loans or withdrawals, for anything from retirement income to a down payment. Loans are generally not taxed as income as long as the policy stays in force and isn't a Modified Endowment Contract.

Expect health questions, possibly a quick paramedical exam, and a review of your prescription history and driving record. Because Taylor works with multiple carriers, she can match you with the one whose guidelines fit your situation.

Taylor Johnson

IUL & Annuity Specialist

Wondering if an IUL fits? Get a straight answer.

Taylor will run real numbers for your age and goals, and tell you honestly if an annuity would serve you better.

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Or call (737) 237-3371