Pinnacle Financial Services is here to help with the basics of what a universal life insurance policy is. Universal life insurance is a permanent type of cash value life insurance policy with an investment savings element and low premiums. This type of policy usually has a flexible premium, but some can be a single or fixed premium. They also come in a lot of different models from fixed-rate, variable, and equity-indexed accounts. IUL’s also have tax-deferred cash growth for retirement while maintaining a death benefit. Besides retirement, this type of policy could be utilized for college planning, a key person for business owners, or even estate planning.

So how do indexed universal life products work? First, the client will pay a premium. The premium can be classified as a target, minimum, maximum or specified. This premium pays for part of the annual renewable term insurance based on the life of the client. If there are any other fees, they will be paid, and the remainder is added to the cash value portion of the policy. The cash value portion of the policy is based on the increases in an equity index (but it is not directly invested in the market). You can select one, or multiple indexes, and even a guaranteed minimum fixed interest rate. If the market goes up, you will receive the gains either monthly or annually based on a participation rate or cap. If the market goes down, you will not lose any of your cash value accumulation. As the cash value grows, the client may borrow from the policy without affecting the guaranteed death benefit. These distributions are tax-free versus tax-deferred in other vehicles, but taxes would be owed on any excess cash value that is withdrawn from the policy. When the client dies, any unpaid loans will be taken from the death benefit if it’s not repaid.

IUL’s are a long-term type of policy. When you are saving money using an IUL, you shouldn’t withdraw from the policy for at least 10 years. This is good for clients who have difficulty saving money on their own and don’t have the option of getting a 401k or IRA.

You might be asking yourself, where does Pinnacle Financial Services fit in? As an FMO in the senior market, it is our job to provide you with the tools and technology to help make your job easier. We offer quoting and electronic application processes for all the major carriers, proven lead programs that offer guaranteed returns on your investment, and a back-office that is second to none. Not to mention, a personalized sales expert like myself, that can help you find the perfect products for your clients.