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.