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Presented by Brokers Alliance with guest cohost Bobby Samuelson.
What Is Indexed Universal Life, and is it good or bad? Bobby Samuelson addresses indexed universal life insurance to give you the tools to determine whether it can work in a bad market environment. Does it work? You decide.

An indexed universal life insurance policy issued by an insurance carrier that has a minimum guarantee where crediting of any excess interest is determined by the performance of an external index, such as the Standard and Poor's 500® index. An Indexed Universal Life policy is considered a moderate risk/moderate return insurance product.

Indexed Universal Life provides lifetime coverage that is unbundled and flexible, yet earns potential interest that is based on an external index, such as the S&P 500®. Universal Life (IUL) was developed in 1997, and was a solution for people who wanted the safety and guarantees of Universal Life, but also wanted a potential for greater interest crediting. This permanent type of insurance provides lifetime coverage if performance warrants, as well as minimum guaranteed cash values and death benefits (like traditional Universal Life). Minimum guarantees may be slightly lower than traditional UL, in order to compensate for the greater upside crediting potential. Upside potential is limited, however. The cash values of an IUL are based inpart on one or more indexed crediting method(s) that the client selects. In this manner, IUL's resemble VUL because the client has some control over the policy through the premium allocation (although not all policies give a choice of multiple crediting methods). However, like traditional UL, the insurance company assumes any risk in the event of a downturn in interest rates. The funds that back this type of product are also held in the insurance carrier's general account. Therefore, the Indexed Universal Life policyholder is always protected by the minimum guarantee, regardless of interest rate performance. Insurance carriers who sell this type of product offer it via a life insurance policy, as it is a fixed insurance product. This type of product is typically positioned for clients who are risk averse, but want greater potential for indexed gains. Indexed UL has greater upside potential (although limited), minimum guarantees, and downside protection. A consumer cannot lose their principal due to fluctuations in the market with this type of product.

Indexed UL is a type of fixed insurance product, and regulated by the state insurance departments for each individual state. It does not require the presentation of a prospectus because it is not a securities product