What Are The Pros And Cons Of Universal Life Insurance?
Indexed Universal Life (IUL) insurance is a cash-value policy that benefits from tax-free market gains without the risk of loss during a market downturn. However, there are several potential drawbacks associated with IUL insurance policies. Here are some of the pros and cons:
| Pros | Cons |
|---|---|
| Provides higher returns than other life insurance policies | Returns are capped at a certain level |
| Policies can be designed around your risk appetite | No guaranteed returns |
| Allows tax-free capital gains | IUL may have higher fees than other policies |
| IUL does not reduce Social Security benefits | Costs and fees associated with an IUL policy can affect profits |
| Death benefit can be passed on to beneficiaries tax-free | Increases in the cash value are limited by the insurer |
| Cash value accumulation from an IUL policy wouldn’t count toward the earnings thresholds for Social Security benefits | Insurer makes money by keeping a portion of the gains |
| A variety of riders, or additional provisions, can make the policy more attractive and more valuable | Costs and fees associated with an IUL policy can affect profits |
While IUL insurance policies do offer potential for higher returns, there are also several drawbacks to consider. For instance, returns can be lower than returns on other products, depending on how the market performs. Additionally, costs and fees associated with IUL policies can affect profits. It’s important to carefully consider your personal risk tolerance and investment goals to ensure that an IUL policy aligns with your overall strategy.
It’s also important to note that the cost of an IUL policy depends on several factors, including age, gender, health conditions, commissions, expense fees, and administrative costs. Premiums are higher as you get older, and smokers may end up paying more. It’s a good idea to check with your insurance agent for the exact premiums and associated fees.
Ultimately, whether or not an IUL policy is the right choice for you depends on your individual circumstances and goals. Talking to an experienced life insurance agent or broker can help you decide if an IUL policy is a good fit for you.
Our carriers beat Colonial Penn, Globe Life, and AARP 96% of the time*
* Based on website quote requests, through 5/31/23.
(Check your rate to see their rates vs. ours)
