One of the best assets that you can add to your portfolio is a Guaranteed Indexed Account (GIA). Both banks and insurance companies sell GIAs. The accounts have a reputation as great assets for many reasons, but one, in particular, stands out: the institution that sells the account provides downside protection while you still get to share upside market potential. GIAs are grouped into three categories: taxable, tax-deferred, and tax-free. This post will focus on tax-free GIAs, specifically Indexed Universal Life contracts or IULs.
What Is Indexed Universal Life Insurance?
As its name suggests, universal life insurance is sold by life insurance companies. Indexed universal life allows the investor to add money to an account that’s indexed to the market. When the market performs well, the account earns money. Yet if the market doesn’t perform well, the purchaser doesn’t need to worry. As stated above, the institution provides protection so you don’t lose your money. IUL is a very flexible form of life insurance. There is no limit on the amount of money you can contribute each year, and you can change the components of the policy when you want.
Safety Of Indexed Universal Life Insurance
An Indexed Universal Life insurance policy is one of the safest assets to hold since the associated risk is so low. In general, if the financial institution holding your money is safe then your money is safe. Life insurance companies have historically been safer than banks. In fact, during the Great Depression, the life insurance industry actually made money; during the Great Recession, no life insurance companies failed.
Benefits Of IUL Policies
The majority of IUL policies are guaranteed to have a 2% minimum annual return. Many states have laws that keep your IUL policy safe in the event that you face bankruptcy or a lawsuit. This means that creditors are prohibited from touching the policy. Over time the indexed crediting bonuses you earn from the insurance will cover any expenses associated with the account. While it’s a prudent idea to purchase an IUL policy early in your career, it’s never too late to purchase a policy and still see returns.
Is An Indexed Universal Life Insurance Policy Right For Me?
An IUL policy is an exceptional asset to include in your portfolio. The best IUL policy must cater to your particular needs, so it’s important to take the time to research your options. If you wish to leave money to your family after your death, an IUL policy is a good investment—the death benefits are income tax-free. Since each policy is different, it makes the most sense if you meet with a financial advisor to discuss your options and learn how an IUL policy can benefit you.