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Indexed Universal Life Insurance: What Is It Exactly?

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Have you been looking into a life insurance policy, and interested in what an indexed universal life policy is? It's a different type of life insurance that gives you an account that you can borrow money from over your lifetime, which makes it an attractive option to some people. Still feel confused? If so, it will help to know the following information about it.

It Provides A Death Benefit

One of the most obvious benefits of an indexed universal life insurance policy is that it provides a death benefit. If you were to pass away unexpectedly, know that there is a death benefit that pays out to beneficiaries that you identify as part of the life insurance policy. This is standard for life insurance policies, and it's a form of financial protection that many people seek.

It Provides Tax-Free Retirement Benefits

What makes an indexed universal life insurance policy unique is that it can provide retirement benefits that are going to be tax-free. Some people decide to contribute to this type of life insurance policy instead of other taxable investment accounts mainly due to those tax-free benefits. This is because you are technically borrowing from your policy and it is not considered as income.

It Provides Guaranteed Earnings

An indexed universal life insurance policy is unique due to how the earnings in the policy are guaranteed. If you are worried about investing money in an account that could suffer financial losses, then consider an indexed universal life insurance policy for the peace of mind that you know how the policy is going to grow over the years. This can really help those people that are risk-averse when it comes to investments.

It Allows You To Apply For Financial Aid

A problem that some parents have when applying for financial aid for their kid's college tuition is that the parents have too much money in their investment accounts, which do not allow their kids to qualify for financial aid. This is not an issue with an indexed universal life insurance policy, because it's not considered the same as a trading account that can be liquidated. Since you're borrowing from a life insurance policy, those are not gains that are not quantified in the same way, which won't make it something that is considered when applying for financial aid. 

Reach out to a life insurance provider for more information about how an indexed universal life insurance policy can work for you.