An Informed Client Is a Satisfied Client
Understanding the “I” in IUL (Indexed Universal Life)
Let’s be honest—life insurance can feel like learning a foreign language. Especially when you hear terms like “indexed strategies,” “participation rates,” or “crediting methods,” it’s easy to zone out.
But here at Tora Wealth, we believe that when you understand how your life insurance policy works, you're more likely to feel confident and satisfied with your decisions. So let’s break down one of the most powerful—but often misunderstood—types of life insurance: Indexed Universal Life, or IUL.
So, What Is IUL?
IUL is a type of life insurance that not only provides a death benefit to your loved ones, but also gives you a chance to grow cash value over time. This cash value can be used however you want—retirement income, education funds, dream vacations—you name it.
The “indexed” part means that your policy’s growth is linked to the performance of one or more market indexes, like the S&P 500®. But here’s the key: your money is not directly invested in the market. So if the market crashes, your policy’s cash value is protected. That’s a big deal.
How Does It Work?
Here’s the basic flow:
You pay into your IUL policy.
Your payments (minus some fees) are allocated into index strategies or a fixed account.
Over time, your policy builds cash value tax-deferred—meaning you don’t pay taxes on the growth unless you withdraw it.
What Are Index Strategies?
Think of these as the engine behind your policy’s growth.
Each index strategy tracks how a market index performs over a period (usually 1 or 2 years). If the index goes up, you can earn interest based on how much it went up.
But there are rules:
Cap: The maximum growth you can earn from the index in a given period.
Floor: The minimum you’ll earn—even if the market tanks. Most IULs have a 0% floor, so you won’t lose money due to negative market returns.
Participation Rate: The percentage of the market’s gain you actually receive.
Bonus: Some strategies give you an extra boost on top of what you’ve earned.
Example:
If the index grows by 10%, your participation rate is 100%, and your bonus is 1%, you’d earn 11% for that year.
And if the market drops? Thanks to the 0% floor and bonus, you’d still get something—like 1%—instead of losing value.
Why IUL Could Be a Smart Long-Term Move
IULs are designed for the long haul—think 20, 30, or even 40 years. The power lies in compound growth and tax advantages over time.
What makes IUL even more flexible is the ability to adjust your index strategies annually. So if your goals change or you want to take a different approach based on market trends, you’re not locked in.
Don’t “Set It and Forget It”
Just because you got the policy doesn’t mean you should leave it untouched. Life happens. The market changes. Your goals shift.
We always recommend checking in at least once a year to review your:
Premium contributions
Index allocations
Policy performance
Any major life changes (new job, kids, retirement, etc.)
A quick review can make a huge difference in making sure your plan is still on track.
Bottom Line: Knowledge Is Power
At Tora Wealth, we don’t just sell policies—we want you to understand them. Because when you know what you’re buying, why you’re buying it, and how it works, you’re not just a policyholder—you’re an empowered client making informed decisions.
If you’re curious about IUL or want a second look at your current life insurance setup, let’s talk. We’re here to guide you, not pressure you.
Tora Wealth
Insurance | Investments | Real Estate
Helping clients build, protect, and understand their wealth—one smart decision at a time.
