---
title: IUL Insurance: Indexed Universal Life Pros and Cons
url: https://coverfolk.com/coverage/iul
updated: 2026-10-08
---

# Indexed universal life (IUL)

Life insurance with a savings side that can grow when the market does. Read the fine print first.

[How much do I need?](/calculator)

Updated October 8, 20266 sources[Fact checked](/editorial-standards)

The short answer

IUL is permanent life insurance with cash value. The cash value growth is tied to a stock index, like the S&P 500, instead of you picking investments.

## Who it fits

People who already have the coverage they need, can pay higher premiums for many years, and understand the fees and limits.

Who buys it
:   Ages 18 to 70

Medical exam
:   SometimesDepends on age, amount and company

Ages
:   Universal life usually runs to a maturity date at age 95 or 100, as long as there is cash value.

## What to know before you buy

**Growth is capped**

Caps and participation rates limit how much of the index gain you get. Ask what they are now and how often they can change.

**Fees come out of cash value**

The cost of insurance and other charges are taken out of your account value.

**Illustrations are not promises**

Projections are not a promise. You could earn less than shown.

**Can lapse**

If the cash value runs out, the policy can end unless you pay more.

**Surrender charges**

Universal life policies may charge you to cash out, often for about 10 years and sometimes up to 20.

**Short term is a bad fit**

Regulators warn that holding these for a short time is not in the buyer's best interest.

## Common questions

Can I lose money in an IUL?

Fees and charges come out of your cash value. If gains are low, the cash value can shrink and the policy can lapse.

Is the illustration guaranteed?

No. Projections are not a promise. You could earn less than shown. Ask to see the guaranteed values.

What is a cap?

A cap is the most the policy will credit in a period, even if the index goes up more.

Can I cancel?

You get a free look period, at least 10 days, for a full refund. After that, surrender charges may apply.

## Learn more

[**What is IUL (indexed universal life)?**](/answers/what-is-iul)[**What is a life insurance illustration?**](/answers/policy-illustration)[**What is cash value in life insurance?**](/answers/what-is-cash-value)[**What is a modified endowment contract (MEC)?**](/answers/mec)

## Sources

1. [FINRA: Insurance](https://www.finra.org/investors/investing/investment-products/insurance)
2. [Texas Department of Insurance: Life insurance guide](https://www.tdi.texas.gov/pubs/consumer/cb018.html)
3. [Vermont DFR Bulletin 121: Indexed Life Insurance Products](https://dfr.vermont.gov/doc/sites/finreg/files/regbul/dfr-bulletin-insurance-121.pdf)
4. [NAIC: Life Insurance Illustrations](https://content.naic.org/cipr-topics/life-insurance-illustrations)
5. [New York DFS: Types of Life Insurance Policies](https://www.dfs.ny.gov/consumers/life_insurance/types_of_policies)
6. [NAIC: Life Insurance Buyer's Guide](https://content.naic.org/sites/default/files/publication-lig-lp-consumer-life.pdf)

Other coverage

## Compare with the others

[Ages 50 to 85

### Final expense

Small whole life plans that pay for a funeral and last bills.

See final expense](/coverage/final-expense)[Ages 18 to 65

### Term life

The most coverage for the least money, for 10 to 30 years.

See term life](/coverage/term-life)[Any age

### Whole life

Coverage that lasts your whole life and builds cash value.

See whole life](/coverage/whole-life)