Indexed universal life insurance (IUL) is your permanent life insurance policy. Indexed universal life insurance policies combine the cash value component with the death benefit. According to the Government of Canada, in the article “Life Insurance,” a universal life policy can help build wealth for beneficiaries. Moreover, by index, we mean that the cash value of your policy is linked to a stock market index. It will usually grow based on the chosen index. For example, it can be the Canadian S&P/TSX composite, a family of around 200 indices. An IUL policy is not only a great way for you to grow your wealth but it has other perks too. IBC Financial experts can guide you with regard to the right policy for your finances.
Indexed Universal Life Insurance works based on premiums that are adjustable. Indexed Universal Life Insurance works within floors as well as ceilings to limit the gains and losses. As per Georgia Rose’s article in Nerdwallet, “Indexed Universal Life Insurance (IUL), How It Works,” these policies will pay you interest as per the underlying stock index’s movement. Here’s how it actually works.
With an IUL policy, you get to adjust your payment amounts. Moreover, there’s also the modify the potential death benefit due to flexible premiums. IBC Financial can help you “Become your own banker” by helping you make the right financial decisions.
You also have the option to adjust your permanent coverage by increasing or decreasing it. Decreasing the death benefit will lower your premium payments. Whereas increasing it will require additional funds.
By means of policy withdrawals and loans, you can access your cash value over a period of time. Additionally, you can also borrow against it and create flexible terms for repayment.
The types of indexed universal life insurance can be linked to one specific stock index or multiple indices. Indexed universal life insurance itself is a type of life insurance (universal). According to Julia Kagan’s article in Investopedia “Equity-Indexed Universal Life Insurance, What it is, How it Works”, you can also categorize your IUL policy based on the type of index it is linked to. For instance, an IUL policy that’s linked to an Equity market index is called an Equity-indexed universal life policy.
Indexed Universal Life Insurance offers both insurance protection and investment potential. IUL products feature cash value growth tied to market indexes. Floor rates protect against losses while participation rates determine market return percentages. Crediting rates establish actual returns without requiring direct market investments. This structure shields policyholders from risks associated with mutual funds or variable policies.
The benefits of indexed universal life insurance include higher growth of your cash value. It provides you lifelong coverage provided your premium payments are up to date. The benefits of indexed universal life insurance are also downside protection. According to Alani Asis from Business Insider in the article “What is an IUL Indexed Universal Life Insurance (IUL)?” you usually get the guaranteed minimum interest rate with a standard IUL. Here are the major benefits of IUL policies.
IUL provides tax advantages through policy loans and withdrawals for retirement income without generating taxable income. Social Security supplements can work alongside IUL benefits. Policyholder behavior risk affects long-term performance. Insurance contracts specify borrowing rates, ultimate surrender rates, and bonus rate opportunities. Credit unions offer guarantees on certain products. Financial Statements and Fund Facts detail variable interest fund options. Licensed insurance advisors review index performance using bar graphs and circular graphs to demonstrate potential returns. Effective estate planning requires understanding how IUL transfers assets to beneficiaries through network providers. Short-term income needs, feature availability, and income property considerations should factor into the application process when working with an insurance professional.
IUL policies in Canada feature cash value accumulation on a tax-deferred basis. Resultantly, you don’t need to pay any taxes on the gains. You can also withdraw from the cash value on a tax-deferred basis.
Since the cash value growth is linked with stock market returns, there’s potential for higher returns. The insurance serves as a good investment strategy. You get financial protection against losses while benefiting from the gains due to market performance.
If you get an IUL policy, you have the freedom to adjust premium payments. The death benefit is also adjustable, as you can increase or decrease it.
The problems with indexed universal life insurance include a limitation in upside or gains. The problems with indexed universal life insurance also pertain to no guarantee for returns. According to Kimberly Rotter from Investopedia, in her article “Pros and Cons of Indexed Universal Life Insurance,” large returns with IUL plans are never guaranteed. Here are the various other cons.
In case your policy’s cash value is lower than the rising insurance costs, the policy lapses. You can attribute the insufficient funds to low stock performance, inadequate premium paid, and more.
Apart from that, there are also a number of costs involved. These include insurance costs, fees and commissions, administrative expenses, and more. These fees can pile up and be rather high at times.
Regulatory uncertainties can also create market risk. If the market performs poorly, your cash value might not experience the growth you anticipated. Further, even if you get downside protection, the returns might be lower than other investment options.
Indexed universal life insurance can be a good investment component if you want exposure to the market upside without downturn risks. Indexed universal life insurance is a good investment if you want life insurance coverage for your entire life. According to Allstate Insurance, in the article titled “What is indexed universal life insurance (IUL)?” IUL is great if you want cash account growth in the long run.
If you’ve maxed out on your retirement policies and plans, then IUL plans can be beneficial. It can allow you to build deferred-tax cash with less age restriction. IBC Financial’s tax and financial advisor can help you plan out your retirement income.
You can borrow from indexed universal life insurance just like any other permanent life insurance policy. You can borrow from indexed universal life insurance using the cash value return component. As per Ashlyn Brooks in her article for Bankrate, “Borrowing against your life insurance policy,” you may borrow against the cash value, as a policy loan. In addition, the cash surrender changes also reduce with time.
The indexed universal life insurance costs depend on which policy and insurance company you’ve selected. The costs with indexed universal life insurance include premium payments and various fees. According to Casey Bond in her article for Forbes Advisor, titled “Universal Life Insurance Explained (IUL Insurance),” an IUL policy has many additional costs other than premium payments. Moreover, your age as well as health status also come into play. Healthier and younger Canadians have to pay less than older people.
IUL allows flexible premium payments. Policyholders must pay minimum premiums to maintain coverage but can make additional payments when financially possible. Beneficiaries receive tax-free death benefits, avoiding income tax liability that affects traditional investments. Optional riders enhance policies with disability benefits, no-lapse guarantees, and customization options based on risk profile and life expectancy. These additions increase policy fees and insurance costs. Editorial policy considerations affect how insurance companies present these common types of affordable life insurance options.
The fees associated with IUL plans depend on the policy selected. However, here’s a general breakdown of the fees involved.
Taking charge of your estate and finances is just the beginning of building wealth.
An indexed universal life insurance calculator provides information related to the cash value return of your policy. An indexed universal life insurance calculator uses your current age and the amount you contribute to the policy to calculate your tax-free return. According to Georgia Rose of Nerdwallet in the article “How much life insurance do I need? Use this calculator”, the IUL calculation should include additions like college fees, mortgage payments, and other long-term expenses. You should subtract your assets from the sum of the expected expenses. The resultant value is the amount that your life insurance will cover.
Many companies sell indexed universal life insurance as part of their life insurance coverage in Canada. Companies selling indexed universal life insurance include IBC Financial, Sun life, Canada Life and more. As per Ben Nguyen of Lifebuzz.ca in his article Best Universal Life Insurance Companies in Canada of September 2025, choosing the best life insurance company depends on factors like the premium rates, the financial strength, range of products offered, and more. More often companies provide different types of life insurance to suit the needs of their clients. IBC Financial is a reputed insurance company that uses the Infinite Banking Strategy. This helps clients in managing their wealth, financial strategies, and life insurance coverage.
Indexed universal life insurance is popular in Canada as it provides tax-free gains and is flexible. Indexed universal life insurance also has greater upside potential and has permanent coverage until premiums are paid. As per Nik Godon of WTWCO.com, in his article “Indexed universal life persistence risks abound, Don’t repeat the misestimations of the past”, indexed universal life insurance policies dominate the variable life insurance and fixed universal life insurance. He states that future profits are mostly dependent on understanding policyholder behavior and the associated risks. Drawbacks such no guarantee of market returns or premium amounts and caps on returns should also be considered. IBC offers indexed, whole, term life insurance policies, and other life insurance policies for clients. We guide clients to gain financial strength and security with our Infinite banking strategy.
The difference between indexed universal life insurance vs. whole life insurance is that IUL offers flexible premiums and death benefit. Indexed universal life insurance vs. whole life insurance comparison reveals that IUL offers higher returns but with more risk when compared to whole life insurance. Amy Danise of Forbes in her article, “Whole Life Vs. Universal Life Insurance” states that whole life insurance offers guaranteed cash value based on a fixed rate of interest. This is not so with an indexed universal life insurance. It is one of the types of life insurance where the cash value growth varies. Further, premiums are fixed in whole life while they are flexible in IUL. While both policies do not have an expiration date and include cash value, their differences are vital to ensure you get a suitable life insurance coverage that aligns with your risk-handling capability.
Rich people use IUL for infinite banking as it offers the advantage of high market gains. Rich people use IUL as it boosts cash value as long as premiums are paid on time. Michael Wei of the Business Times, in his article “How life insurance can be harnessed in new ways” reveals that some types of life insurance policies can work as an investment strategy for the rich people. IUL insurance links cash value increase to gains and losses found in an index such as the S&P 500. The main advantage with this type of life insurance is that you can adjust the premiums you pay and the benefits on death but only within certain parameters.
Rather than assist when your life ends, IUL can be used for beginning a legacy. The insurance policy can help maximize wealth by using it as one of the investment options for diversification. It can help to hedge against market risks. It can also be used as one of the investment objectives where it can serve as an asset for leverage when needed by an individual or family.
To get more information about indexed universal life insurance and its benefits contact IBC Financial today.
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