Indexed Universal Life (IUL) insurance is a type of permanent life insurance that provides both a death benefit and a cash value component. Its cash value growth is tied to the performance of a stock market index, allowing for higher earning potential than traditional universal life policies, while also offering flexibility in premiums and coverage. However, IULs can be more complex and generally come with higher fees.

How an IUL Works
A portion of each premium pays for the cost of insurance, while the remaining amount is deposited into a cash value account. That cash value earns interest based on a market index—such as the S&P 500—without being directly invested in the market. Most IULs offer a minimum guaranteed interest rate (often 0%) to help protect against market losses, but potential growth is typically capped or limited by participation rates set by the insurer.