Indexed Universal Life Insurance
Indexed universal life insurance (IUL) is a type of permanent, cash value life insurance. Like universal life insurance (UL), IUL offers you the ability to change your level of protection, premium amounts, and payment frequency.
Life insurance companies develop new products to meet changing insurance needs and demands. For many years, whole life insurance (WL) met the need for permanent life insurance protection by providing a permanent death benefit, fixed premium, guaranteed* minimum interest, and sometimes dividends. But WL does not offer you much flexibility relative to premiums, death benefits, and earnings.
IUL is a form of universal life insurance with excess interest credited to cash values. But, unlike UL, the amount of interest credited is tied to the performance of an equity index, such as the S&P 500. Like some UL insurance policies, most IUL policies provide a minimum interest credited to cash values, even when the index produces negative returns. Determining how much interest will be credited to cash values is based on a number of factors.