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Understanding Indexed Universal Life Insurance

Life Insurance
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Planning for the future isn't easy. With so many important goals to consider, it can be hard to find the right balance between budgeting for current needs and planning for future expenses. That's where a product like indexed universal life insurance can help.

Indexed Universal Life is a Flexible Planning Tool

Indexed Universal Life (IUL) insurance is a valuable tool that can help you work toward several financial goals at the same time. First, the death benefit can provide a source of income for your beneficiaries, and help ensure that your dreams for them still happen — even if you are not there to personally provide for them.

IUL also has the ability to grow "cash value" — money inside a life insurance policy — over time. Any premium paid above the IUL policy's fees, charges and expenses (known as the "net premium") builds up as cash value, and can grow through credited interest. What makes IULs special, however, is the balance they may be able to provide between growth potential for cash values and possible protection against loss.

How Indexed Universal Life Works

IUL policyholders have control — within certain guidelines — over how the funds in their policy are allocated between different interest-accruing accounts. There is generally one fixed account, which gives an interest rate declared by the life insurance company, and multiple indexed account options.

When IUL policyholders decide to put funds in an indexed account — rather than receiving an interest rate chosen by the life insurance company, their cash value will be eligible to receive any earned "indexed interest credits." Simply put, any funds in an indexed account receive an interest rate that is based in part on how a market index performs over a given period of time. The life insurance company uses the index as a benchmark to help determine any credits that the IUL policyholder may be entitled to. The rate for an indexed account may be either higher or lower than the interest rate the life insurance carrier credits on the non-indexed accounts (e.g. the fixed account), and is subject to limits.

Each indexed account option has a minimum guaranteed interest rate1, protecting it against loss in the event that a market index goes down. If the option has a guaranteed minimum interest rate higher than 0%, the indexed account may even be eligible for interest during periods where the market index has gone down.

How Can Indexed Universal Life Help You Meet Your Financial Goals?

Cash value in a life insurance policy can add flexibility to your financial planning. Funds in an indexed universal life policy can later be withdrawn, taken out as loans, used as collateral, or can help cover the costs of maintaining the insurance coverage.2

Some have found cash value life insurance to be a helpful way to:

  • Generate generally tax-free retirement income streams.
  • Help cover the cost of education for children and grandchildren.
  • Set aside financial resources for the unexpected.
  • Plan for increasing costs of health care, long-term care, assisted living and other similar expenses.

Indexed universal life (both individual and survivorship) provides death benefit protection today, and flexibility to help cover your needs in the future. When funds are allocated to an indexed account option, cash values may get the dual benefit of increased upside potential through index-based growth and downside protection against market-based loss.


1 Minimum interest rate guarantees can vary by account option and by state. Please review the Indexed Explorer Plus® Client Guide and the Expedition SIULTM Client Guide for details for Columbus Life's minimum interest rate guarantees.
2 Loans will accrue interest. Loans and withdrawals may generate an income tax liability, reduce the Account Value and the Death Benefit, and may cause the policy to lapse. Sufficient premium and account value are necessary to cover insurance costs. Index returns do not guarantee that the policy will stay in force.

The information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice. This material is not intended to be used, nor can it be used by any taxpayer, for the purpose of avoiding U.S. federal, state or local tax penalties. This material is written to support the promotion or marketing of the transaction(s) addressed by this material. This material is being provided for informational purposes only. Columbus Life does not provide legal or tax advice. Laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy, or completeness of this information. Federal and state laws and regulations are complex and are subject to change. Consult an attorney or tax advisor regarding your specific legal or tax situation. There are insurance related costs to a life insurance policy. Premiums paid must produce sufficient cash value to pay insurance charges.

IUL and SIUL are universal life policies. Universal life insurance has insurance related costs. Premiums paid must produce sufficient cash value to pay insurance charges. Any indexed returns do not protect against lapse if premiums and returns do not provide sufficient cash value to cover loan interest and insurance costs.

Flexible Premium Adjustable Life Policy with Indexed Options Policy series ICC17 CL 88 1708. Flexible Premium Survivorship Adjustable Life Insurance Policy With Indexed-Linked Interest Options Policy series ICC19 CL 92 1908.