Indexed Universal Life Insurance (IUL)
An IUL is a permanent life insurance policy that allows policyholders to take part in the gains of an underlying stock market index, while also providing some type of fixed guaranteed return. Indexed policies offer a variety of popular indexes to choose from, such as the S&P 500 and the Nasdaq 100.
Indexed policies allow policyholders to decide the percentage of their funds that they wish to allocate to fixed and indexed portions. Additionally, these types of universal insurance policies typically guarantee the principal amount in the indexed portion, but they cap the maximum return that a policyholder can receive in a particular account. These policies are usually not very expensive (due to lack of management) and are safer than an average variable universal life insurance policy. However, the upside potential is limited when compared to variable life insurance due to the cap.