An Index Universal Life (IUL) can be a sensible and valuable addition to an investment portfolio. It can also, like every other vehicle, be the wrong choice for some investors. Because of its unique construction, IUL can provide additional value-added benefits that can contribute to your success as an investor if you understand how it works and why it might benefit you. The first thing investors need to do is not lose money. Before we can even start talking about how to make money with an IUL we have to ensure we don’t lose any money in the form of premiums paid or negative account values due to change in market conditions. So, let’s look at these potential pitfalls and what can be done about them:
How can you lose money in an IUL?
There are two primary ways you can lose money in an IUL: 1) Through lapsing your policy – this means you failed to keep up your policy payments and it was terminated. 2) By surrendering the policy – this means you decided to get rid of your life insurance policy altogether. So, what can you do to protect yourself against these risks? The best protection against losing in an IUL is knowledge. The more information and education you can gain about your insurance policy, the less likely you are to make a costly mistake. Educating yourself can help protect against lapsing or surrendering your life insurance policy because it will provide you with a deeper understanding of what can happen if something goes wrong and how to work through it. And, if things do go wrong and you can’t recover quickly enough on your own, this increased understanding can give you the insight required to find the right solution for your specific situation. IUL is a valuable addition to many portfolios, and is a great tax-free retirement source of income.
