SETH MANNINGLife Insurance Solutions
Long-term protection.
Understand the possibilities.
Explore life insurance with cash value potential, and understand the costs and commitments that come with it.
Request a free consultation ↗Know what you are choosing.
Start with your needs and budget. Then review the actual policy terms and available options.
A life insurance foundation.
IUL is a type of universal life insurance designed for long-term coverage. Keeping it in force depends on meeting the policy’s requirements.
Index-linked interest.
Interest credits are determined by the policy’s formula. Caps, participation rates, and other limits may apply. You are not investing directly in the index.
A plan to maintain.
Premiums fund coverage and policy charges. Review annual statements and updated illustrations to understand whether funding remains sufficient.
Non-guaranteed interest credits and illustrated values are not promises. An index-crediting floor does not eliminate policy charges or prevent cash value from declining. Insufficient funding may cause a policy to lapse.
How IUL works.
Protection first. Understand the details.
IUL combines life insurance protection with cash value potential. These pieces work together within one policy.
1. You pay premiums
Premium payments help fund your policy. Flexible payments still need to satisfy the policy’s requirements; paying less may mean more funding is needed later.
2. Costs are deducted
The insurer deducts insurance costs and other policy charges. Costs vary by policy and insured person, and insurance charges can increase as you age.
3. Interest may be credited
Index-linked strategies use a policy formula to determine interest credits. Caps, participation rates, spreads, and other terms may limit crediting. You do not own or invest directly in the index.
4. Coverage stays the focus
The policy provides a death benefit while in force, subject to its terms. Cash value and death benefit are different amounts; beneficiaries do not necessarily receive both added together.
Upside potential. A floor on interest credits.
This simplified example compares hypothetical annual index changes with the interest rate credited under an assumed policy formula. It shows interest credits before charges—not cash value growth or a return on premiums.
Example assumptions only: annual point-to-point crediting, 100% participation, a 6% cap, a 0% floor, and no spread or bonus. These are invented teaching assumptions, not current rates or an offer from any insurer.
| Annual period | 1 | 2 | 3 | 4 | 5 | 6 |
|---|---|---|---|---|---|---|
| Index change | +8% | -10% | +4% | +12% | -6% | +3% |
| Interest credit* | 6% | 0% | 4% | 6% | 0% | 3% |
*Before policy charges. In this example, positive index changes can produce interest credits up to the assumed cap. A negative index change produces a 0% interest credit rather than a negative index-linked credit.
A 0% crediting floor is not a guarantee against loss of cash value. Insurance costs and other charges continue and can reduce policy value, even when the interest credit is 0%.
No historical index performance, future earnings, or policy values are shown. Actual crediting methods, floors, caps, participation rates, charges, and guarantees depend on the issued contract and may differ. Non-guaranteed terms may change within contractual limits. IUL does not invest directly in an index. The chart does not show compounding or a policy’s net performance.
What if no interest is credited?
Imagine a simplified policy accounting period with $10,000 in beginning cash value, $600 in total charges, no new premiums, no loans or withdrawals, and $0 interest credited.
The takeaway: a 0% index-crediting floor, if provided by the policy, does not prevent cash value from declining after charges. It is not a 0% guarantee on your overall policy value.
If this example also assumed a $1,000 surrender charge, the net cash surrender value would be $8,400. Cash value is not necessarily the amount available if you cancel the policy.
All amounts are invented solely to explain the mechanics. They are not actual, typical, guaranteed, or projected policy results or charges. Actual deductions, crediting timing, surrender charges, and values depend on the contract. This is an educational example, not an insurer’s policy illustration.
When an index rises
A positive index change does not mean your policy receives that same percentage. The contract’s crediting formula and limits determine any interest credit. Non-guaranteed crediting terms may change within contractual limits.
Review the policy over time
Lower credits, ongoing charges, loans, or withdrawals can reduce cash value. Additional premiums may be needed to keep coverage in force. Loans accrue interest and can reduce benefits; a lapse or surrender may have tax consequences.
Before applying, ask for a carrier-issued illustration showing guaranteed and non-guaranteed values, your intended premiums, policy charges, surrender values, and any planned loans or withdrawals. Neither an illustration nor index history promises future results.
Consumer education: NAIC: life insurance ↗ · New York DFS: how universal life works ↗
Clarity before commitment.
Is cash value growth guaranteed?
Only the guarantees specifically stated in the contract apply. Non-guaranteed interest credits and illustrated cash values can change. Ask to compare guaranteed and non-guaranteed illustrations.
Can I take money from the policy?
Loans and withdrawals may be available, subject to policy terms. They can reduce cash value and death benefits, incur interest or charges, and increase lapse risk. Tax consequences may apply; consult a qualified tax professional.
What should I review before applying?
Review costs, surrender charges, funding assumptions, crediting limits, guarantees, and what happens if performance is lower than illustrated. Ask for an illustration that reflects your intended funding and any planned access to cash value.
Learn more: NAIC consumer guide to life insurance ↗ · Universal life considerations ↗
Let’s talk about what matters to you.
Request a free consultation with Seth Manning to explore indexed universal life insurance and discuss your next step.
Coverage is subject to insurer approval. Product availability, underwriting, costs, and benefits vary by insurer and state. No specific carrier or product is represented on this educational page.