Indexed Universal Life is a powerful life insurance and investment instrument that accomplishes multiple needs in one package. The life insurance aspect covers your family if you pass away too young or if you become disabled and the cash value in the policy can be used for extra retirement income in your later years. In order to ensure the success of the IUL for the long term, you need to understand how IULs work and the recipe to keep them going strong.
IULs are very flexible when it come to the annual premiums. The annual premiums are a suggestion, and not mandatory. While it may be easier to skip the premium, the IUL needs to be sufficiently funded to cover the annual cost of insurance. Insurance companies usually recommend the minimum premium you need to keep the policy sufficiently funded, but in order to maximize the growth of your cash value you need to load up the policy with the maximum premium you are allowed to pay within IRS guidelines. Max funding the policy leaves plenty of extra cash value over to grow tax free to fund your retirement. The combination of time, compounding interest, and the floor of zero usually translates into millions in tax free returns.