Pure protection vs. tax-free retirement income — these aren't the same product.
Agents often pitch IUL as "better than term because it builds cash value." That's the wrong framing. Term and IUL solve different problems. Term replaces income if you die young. IUL, when structured properly for someone who's already maxing traditional retirement accounts, provides tax-free retirement income with a life insurance wrapper. Confusing the two leads to expensive mistakes.
| Term Life | Category | Indexed Universal Life |
|---|---|---|
| ✓ $18–$45 | Monthly cost (sample $500K) | $200–$600 |
| 10–30 years | Coverage duration | Permanent |
| No | Builds cash value | Yes — index-linked |
| N/A | Downside protection Credited interest can't go negative | 0% floor |
| N/A | Upside potential Varies by carrier and index | 8–12% typical cap |
| Fixed | Death benefit flexibility | ✓ Adjustable |
| Fixed | Premium flexibility | ✓ Flexible (within limits) |
| ✓ Simple | Complexity Illustrations can be misleading | Complex |
| No | Tax-free retirement income When funded properly | ✓ Yes (policy loans) |
If you need life insurance, buy term. Full stop. IUL is not a replacement for cheap, efficient protection — it's an advanced financial planning tool for people who've already maxed a 401(k) and Roth IRA and need another tax-advantaged bucket. IUL sold as "investment + insurance" to someone who hasn't done the basics first is almost always the wrong choice.
An independent agent isn't tied to one product or carrier. They'll run real numbers for your situation — not a one-size-fits-all pitch.
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