Indexed Universal Life (IUL)
Glossary: Understand the
Power of Flexibility & Growth
Why Understanding IUL Matters
Indexed Universal Life (IUL) Insurance blends life protection with growth potential tied to market indexes — without the risk of direct market loss. At Insure Your Success, we help clients use IULs strategically for tax-free retirement income, wealth accumulation, and living benefit protection.
This glossary simplifies the key terms you’ll encounter while learning how IUL policies function. Use it as a guide throughout your Financial Assessment → Financial Analysis → Strategy Design process to build understanding and confidence.
Top 3 Trending Terms
1. Cap Rate
The maximum percentage your policy can earn during a credited period based on index performance.
Pro Tip: A higher cap rate allows greater potential returns. Understanding your carrier’s cap rate helps forecast realistic policy growth and manage expectations.
2. Participation Rate
The percentage of index growth your policy participates in.
Pro Tip: If your participation rate is 80%, and the index gains 10%, your credited return is 8%. Balancing participation with protection defines a strong IUL strategy.
3. Living Benefits
Allows access to part of your death benefit during serious illness or disability.
Pro Tip: Living benefits make IULs more than life insurance — they’re income protection tools for both your life and legacy.
A - Z Indexed Universal Life Glossary (30 Core Terms)
1. Account Value: The total accumulated value of your IUL policy, including interest credits.
2. Annual Reset: The point each year when gains are locked in and a new crediting period begins.
3. Cap Rate: The maximum interest rate credited (see Top 3 Terms).
4. Cash Value: The growing portion of your premium that earns interest based on the index.
5. Corridor Test: A compliance measure ensuring the policy maintains IRS life insurance status.
6. Death Benefit Options: Choices between level or increasing death benefit structures.
7. Fixed Account: The portion of funds earning a guaranteed minimum interest rate.
8. Floor Rate: The minimum guaranteed rate of return (often 0%) ensuring no market loss.
9. Index Crediting Method: Determines how index performance is measured (annual, monthly, or point-to-point).
10. Index Participation Rate: The percentage of index growth your policy participates in.
11. Indexed Strategy: Allocation that links your cash value growth to market index performance.
12. Loan Provision: Rules for borrowing against your cash value.
13. Over-loan Protection Rider: Prevents policy lapse if excessive loans reduce the cash value too far.
14. Policy Charges: Fees deducted from the account to cover insurance costs and administration.
15. Policy Illustration: A projection showing how your IUL may perform over time.
16. Policy Loan: Borrowed funds against your cash value, which continue to grow if structured properly.
17. Premium Flexibility: Ability to adjust payment amounts and timing.
18. Segment: A defined period during which index performance is tracked.
19. Spread (Margin): A deduction from credited index interest before applying growth to the account.
20. Surrender Charge: Fee for early policy cancellation or excessive withdrawal.
21. Sweep Date: The date funds are transferred into a chosen indexed account.
22. Tax-Free Loans: Accessing cash value without triggering income tax, if managed correctly.
23. Underwriting Class: The insurer’s assessment of your health and risk profile.
24. Variable Loan Rate: Interest rate that fluctuates with market conditions.
25. Withdrawals: Partial access to your cash value without canceling your policy.
26. Cost of Insurance (COI): The internal charge deducted to maintain your death benefit.
27. Crediting Period: The duration during which index performance is measured before applying gains.
28. Participation Rate: The portion of index growth credited (see Top 3 Terms).
29. Policy Owner: The person or entity holding rights to the policy.
30. Zero Floor Guarantee: Protects against loss during negative market years.
Ready to See How IUL Fits Your Financial Future?
Understanding Indexed Universal Life terms gives you clarity and control over how your policy works — but true results come from applying strategy. Begin your Financial Assessment today to learn how IULs can create long-term, tax-advantaged retirement income.