Life insurance is going through a boom cycle largely due to the popularity of the indexed universal life (IUL) product.
The life insurance industry is doing remarkably well on the heels of the wildly popular indexed universal life (IUL) product. Ten years ago, IUL was a boutique product generating only $539 million in revenue, according to Wink. Universal life garnered an impressive $2.1 billion in revenue in 2018, up 11% over the previous year. Indexed products represented 99% of universal life sales, according to Wink.
What is IUL?
IUL is essentially life insurance coupled with an index fund such as the S&P 500. Premiums go toward the life policy and fees while the remainder goes into the index fund. There are parameters around how much a policyholder can earn and lose on their index. Dividends may be capped at 10% but policyholders are protected from losing money in the event of a market downturn.
Why is IUL So Popular?
IUL is more a more dynamic, exciting life product than a whole life policy. It’s more of a 401k with a death benefit. For consumers, IUL’s popularity can be attributed to it’s safeguards against market volatility. Policyholders don’t lose in a down market. Considering recent market turbulence, there’s a lot of appeal playing the market with a safety net sitting below the index fund. The premiums are also fairly low, as policyholders can pay monthly premiums with the interest accrued from the index fund.