Indexed universal lifestyle insurance (IUL), however, will allow you to earn interest tied directly to the performance of index funds like S&P 500. Your insurer may restrict your rate of return. You might also have the option to receive all or part from your cash value through a fixed-rate bank account.
Your universal life insurance policy will grow in cash value as you continue to pay your premiums. Depending on your insurer and policy, you may be required to pay one upfront premium payment. Or a fixed monthly Premium.
Some universal life insurance policies offer cash value as an option. You can borrow or withdraw money from cash value. If you are unable to pay your death benefit, your insurance company will reduce your beneficiary's payout by the amount of any loans or leaves. However, for some buyers accessing cash value may be more important than receiving a full payout to beneficiaries.
Further, the cash-value component earns interest according to a money index rate or a money markets rate of interest. Your cash value will increase, helping to pay your premium. In the event of financial changes, lowering your monthly payments may be a good option.
If you borrowed against your cash value, there is one exception. It isn't taxable if you repay the entire loan amount while your policy is active. Your policy could be canceled if the total amount borrowed (incl. interest) exceeds its cash value.
Variable universal insurance (VUL), allows policyholders to decide how to invest the cash portion of their policy. There are many options available, including stocks, bonds and mutual funds. You can also choose to invest across multiple accounts.
An UL policy will provide the insured with many benefits and permanent protection, as well as flexible premiums that can accommodate variable earnings. There may be options to invest your cash values in different market-based investment options depending on which life insurance company you have. This could give you greater growth opportunities. Universal life on the other side offers lower or no cash value guarantees.