What is a Fixed Index Universal Life policy (FIUL)?

FIUL is a type of permanent life insurance.  It is a very flexible, powerful, and soon to be, popular insurance policy. 

An FIUL is different from other traditional insurance products because of how it earns interest on the account value.  With an FIUL product, you can direct the account value into –either a fixed account, an indexed account, or a combination of the two.  In the fixed account, the account value will get a fixed rate of interest declared by the insurance company.  (Some are more competitive than others-so shop around).  In the indexed account, the rate of interest is determined by the performance of the S&P 500 Index (stock market)-subject to a maximum cap (ceiling).  The cool part about the indexed account is that you have the potential to earn higher rates of return based on the stock market’s performance with a guarantee that your earnings will never be zero.  The insurance company establishes a percentage that your rate can never fall below- so you have floor as well.

It can help you……

• provide financial security to your family
• supplement your retirement income-tax free!
• build financial security for your business
• pay off credit cards, student loans, other debts
• cover mortgage payments
• send your kids to college
• address emergencies if they come up

How can one policy to all of this?

• Liquidity-Access to withdraw money from your plan based on available cash value
• Potential to earn-Earn interest based on the performance of the stock market with a ceiling and floor.  (No downside risk)
• Flexible Death benefit- Select a set amount or an increasing amount over the life of the policy
• Tax Benefits-Tax free income potential, insurance benefits and tax deferred growth of account value
• No-Lapse Guarantee- A guarantee, for a set number of years, that the insurance contract will not lapse as long as premiums are paid

                                             Exciting stuff!

Squee!  Photo Credit

I plan on discussing all of this information and options in detail and review potential scenarios, that might pertain to your situation, in which an FIUL can really make a huge difference in your life. 

Life Insurance Basics

Life insurance offerings can be divided into two basic classes: temporary (term) and permanent (perm); and the following subclasses: term, universal, whole life and variable life.  These are not all the types and classifications of life insurance out there, but these are the ones that are the most common.

Temporary or "Term" life insurance provides protection for a specified period of time only, like a term of 10, 20, or 30 years. Term life insurance is the probably the most affordable coverage because it doesn’t have any bells and whistles, but simply provides a death benefit.  This is the type of insurance I original bought because the price stayed the same each year-during my designated term.  However, after about a year into the policy, I got this letter stating that --oh by the way---at the end of my term, my premium was going to go up by eleven thousand dollars! ($11,000.00)  Of course, I could choose another term or different policy before my term ran out.  It was nice of them to give me plenty of warning, but I was still shocked at the price jump.  The price, or premium, typically stays the same each year during the term. So the downside to term insurance is that once the term expires, the price to buy a new policy goes up as you get older. 

Permanent life insurance, on the other hand, provides a death benefit for your entire life and it can also be an investment. A portion of the premium you pay goes into an account called the policy’s “cash value”.  This account value grows on a tax-deferred basis until you take a withdrawal or borrow from the policy.  (Then you have to pay taxes on what you borrow)

The downside to permanent life insurance is that it can be expensive, and often comes with fees and commissions.  These fees can reduce your annual return on the investment part of your policy when compared to what you could earn investing straight into the market.

The three most common types of permanent life insurance are:

o    whole life

o    universal life

o    variable life

Whole Life Insurance (perm)

A whole life insurance policy gives you a guaranteed death benefit amount, a fixed annual premium, and a guaranteed rate of return on your cash value. Since the whole life policy comes with those important guarantees locked in, that means that whole life is the most expensive life insurance product available.  To some, having those guarantees locked in, with no fear of fluctuation, is worth the extra expense.

Universal Life Insurance (perm)

Universal life doesn't offer the same guarantees as a whole life policy, but it does have more flexibility. Universal life premiums are cheaper, but they are not locked in and can increase up to a set maximum amount.  This means that, with universal life, you get a minimum rate of return on your cash value (a floor), but your cash has a higher set ceiling.  It can grow quicker because you can earn more when the financial markets go up- up to your set ceiling.

Variable Life Insurance (perm)   

Photo Credit


Variable life insurance is a lot like a universal policy, except you can choose how to invest your money from a menu of securities and funds. Variable life offers the most flexibility AND the most risk of all the permanent policies. Variable life policies have no guaranteed minimum rate of return (no floor).  If the investments you choose perform well, then your cash value could skyrocket (no ceiling)....... but if not, your cash value could tank.

It All Starts with History

I must confess that I spent some time combing the internet looking for something funny about the history of life insurance.  I was hoping to find a cartoon with a pre-historic cave man (no relationship to the commercials) looking up at a talking Tyrannosaurus, who has a bubble over his head that reads:”Pay me and I won’t eat you and your family”.  So much for finding that, so you will have to use your imagination.

I was wondering about the history of Insurance as I never really took many business classes in school so I did not recall knowing any information about it.  I thought I would share a little of what I found.   

A Brief History of Life Insurance

Different types of life insurance have been noted in history back to 100 B.C., when Caius Marius, a Roman military leader, created a burial club for his troops. When a member died unexpectedly, other members would pay for the funeral expenses. Similar clubs were established, as Romans believed improper burials led to unhappy spirits. Eventually, the clubs started including a stipend for the survivors of the deceased [1].

After the Roman Empire fell, life insurance didn't reappear until 1662, when John Graunt discovered predictable patterns of longevity and death in a defined group of people, despite the uncertainty about the future longevity or mortality of an individual person. A few decades later, in 1693, astronomer Edmond Halley constructed the first mortality table to provide a link between life insurance premium and average life spans [1].

It wasn't until 1732, though, that the first insurance company in the United States formed in Charleston, S.C., and life insurance wasn't added to its product line until 1760. In 1756, Joseph Dodson reworked Halley's mortality table, linking premium rate to age. By 1759, the Presbyterian Synod of Philadelphia sponsored the first life insurance corporation in America for the benefit of Presbyterian ministers and their dependents. Episcopalians organized a similar fund a decade later [1].   

So-Life insurance started with the church!  Who knew?

[1] Staff Writer. (2011, Sept 1). Timeline: History of life insurance. Retrieved from http://www.lifehealthpro.com/2011/09/01/timeline-the-history-of-life-insurance

What's my story?

People in my professional circle ask me why I am writing about universal life insurance. They know I work in software customer service and universal life insurance is not something I should know much about. I am not expert on the subject - so why write about it? More importantly, who would want to read what I write about the topic. They are right on some counts. I do not sell insurance and I am not an agent. (I do have some high school class mates that sell insurance and my step mother worked for State Farm for many years as a receptionist. I am not counting that towards my qualifications to write about insurance.) The one thing that my colleagues fail to see is the value in writing about a topic that I have no expert knowledge about. I think that people dig that, they want someone to tell them about their experiences, explain things in non-expert ways, ESPECIALLY about a topic most heinous-Insurance. (Sorry insurance people)

Blaugh.com (Fitz & Pirello)

I must confess, though, I am getting my Master’s degree in Education. (See my Instructional Designers blog) Instructional Design Technology (IDT) is my concentration and this is a fairly new educational arena. (If you are interested in reading more about instructional design, Christy Tucker has a great page that explains what we do.) In a nutshell, IDT’s work with “Subject Matter Experts” to interpret, translate, pick out the fine points of a topic and present it in a way that learners can learn it. I think you can see where this might be going. Through my trials with finding the right insurance policy, the instructional designer in me said “Wow, Insurance is a bear to understand. I bet other people have the same type challenges.” So—I decided to put my IDT skills to work and tackle Fixed Index Universal Life Insurance.

Now, it is hard to believe that someone would want to write about Fixed Index Universal Life insurance and not have some underlying personal or monetary interest. You are right; I do have some of that going on. You won’t get to the end of this blog and see that this was a “paid for” advertisement or “for just 20 bucks-you can buy my e-book”. My hope is that this blog will lead me to a possible job in instructional design. It is part of my virtual portfolio and maybe, just maybe, someone will recognize my mad skills at taking a tough topic and making it understandable. Also, I would not turn down the extra web traffic, and maybe get some extra change using ads on my blog- but that is really it.

I did a lot of research for FIUL’s on the internet, looked for companies that offered them and found a mediocre showing of information. So, I started calling those companies that offered this type of insurance, and I asked a lot of questions. I have talked to the real FIUL experts.  I am also the proud owner of my own Fixed Index Universal Life Insurance policy and definitely feel a sense of relief about my own personal retirement.  (There is an idea...maybe I can get a discount for some referrals.) Seriously, though -I want to share this information and these experiences with you. I want to share other people’s stories about their journey in finding and funding their FIUL. I want to share stories of people that have retired and are enjoying their policy for its true value. What is that like, how is that going? (If you have a story, please email it to me and I will gladly share it).

Next we will talk life insurance definitions and what fixed index means.

Putting Life Back into Life Insurance



I am in my mid forties and the youngest of a large family.  Being the youngest has its own stigmas and challenges in that I will never be quite mature enough to do and think for myself-in the eyes of  my family.  Take that perception and mix it with a family table discussion about life insurance and I get this:

Photo Credit

“Insurance agents are sleazy like used car salesmen.  You can’t trust those guys”

Me: “Come on, insurance agents are bound by state laws that have strict ethical codes that prevent and punish “sleazy” behavior.  I don’t think, however, that used car salesmen adhere to the same standards.  I will give you that”

“I am too old to worry about that.  I would never get anyone to insure me anyway. “

Me:  “ I am sure anyone can get life insurance.  It is just a matter of the amount of coverage available and what it may cost.  Don’t you worry about what your kids’…. and your baby sister’s ……future?

“I don’t want to talk about life insurance.  It just makes me think about death.  It should really be called death insurance”

Me: “Sigh”

I finally just got up and left the table…. but not before I took the last piece of pie with me. 

Youngest siblings do have some perks too.

I have to admit that I felt like life insurance should be called death insurance too, but did see the value in having a policy to make sure my funeral expenses were taken care of, and that my loved ones would not get stuck with any unexpected expenses.  The bigger issue for me was retirement.  I was on the verge of a real panic about it.  I never knew that I could have a life insurance policy, with a death benefit AND be able to use it to supplement my retirement.  This was exciting news for me and did help put the “life” back into life insurance.  I am sure that I am not alone in these perceptions and panic, so I want to share information that I have found in my journey.  I now have a Fixed Index Universal Life Insurance Policy that meets all of my needs. 

(Details forthcoming)