Matt Vinez, Life Insurance Broker

What is indexed universal life insurance and how does it compare to traditional investments?

Answer: IUL provides a permanent death benefit first & foremost. You essentially overpay for that coverage, and the overpayment goes into a cash value (savings) portion of the policy. That can then be credited with various indexed interest options. The key idea is that your plan is buying options rather than actual stocks/funds, so you are not actively participating in the markets. You get limited upside potential, but no chance of a loss of premium. For example, and S&P index might cap your earnings as 12% even if the market gains 20%, but you run no risk of losing money if the market goes down. Your savings potential is limited by the size of the death benefit, so you take a "backwards" approach to buying. Instead of saying "what's the least I can pay for $100k in coverage", you start with your budget & say, "I want to save $500/mo. What's the smallest death benefit I can buy at that price?" The more money that goes into the cash account, the faster the savings will grow.