what is iul account?
Like all financial products, IUL policies have some benefits. Here are a few worth knowing about.
For someone who doesn't trust themselves to save money, an IUL acts as a forced savings account. Because part of each premium goes toward cash value, once the premium is out of their hands, the insurance company does the rest.
IUL death benefits are distributed tax free to beneficiaries. In addition, the policyholder can withdraw up to the amount they have contributed toward cash accumulated tax free. Once they begin withdrawing earnings on the money, funds are taxed as regular income.
If a policyholder needs money and their IUL has accumulated enough cash, they may borrow against that money. If they fail to repay the loan with interest, the outstanding cash value will be subtracted from the policy death benefit.
Say a person purchases an IUL in their early 30s but is diagnosed with a rare disease 30 years later. As long as that person pays their premiums, they continue to be covered, regardless of their health.
Unfortunately, IUL insurance also has more than its fair share of disadvantages. Here are a few to be aware of.
As a person grows older, the odds of dying increase. For that reason, insurance companies raise the cost of IUL insurance premiums by as much as 8% to 10% annually after the age of 50.
From the moment a policyholder pays their first premium, fees nibble away at any profits they may gain. To understand how, it helps to understand how a premium load works. According to the International Risk Management Institute, Inc., a premium load is the percentage of a policyholder's premium that is deducted to cover policy expenses.
Here's a sampling of the types of fees a policyholder can expect to pay:
According to LIMRA -- the not-for-profit research association for the financial services industry -- sales of IULs are predicted to be up 11% in 2021. While there could be many reasons for the increase, one reason may be the tremendous fees collected by the insurance industry each time an IUL policy is sold and maintained.
An IUL account is the part of an indexed universal life insurance policy that's supposed to build cash value over time (kind of like a savings account). If you're asking why a savings account is teamed up with a life insurance policy, we're right there with you.
