Insurers and policyowners can configure an indexed universal life (IUL) policy’s premium payments and death benefits to resemble virtually any type of life insurance policy, from annually-renewable term to single premium whole life.
Consequently, any other type of policy that meets a policyowner’s needs is a suitable, and perhaps preferable alternative if the policyowner does not need the IUL’s flexibility or equity indexing feature.
However, a number of other types of policies or strategies offer some of the features of UL and not others, if policyowners desire only certain features.
IUL policyholders enjoy virtually the same advantages they would enjoy if they owned regular universal life policies. (Photo: iStock)
1. Current-Assumption Whole Life (CAWL)
Sometimes called interest-sensitive whole life, CAWL is essentially IUL without the adjustability features or equity-indexed interest crediting rate. However, similar to IUL’s equity-indexed interest crediting formula, CAWL uses current interest rates in determining additions to cash values. However, similar to traditional ordinary whole life and in contrast with IUL, CAWL generally offers the policyowner little flexibility with respect to changing premium payments or death benefits.
IUL is a tool that can be used for any life insurance need. (Photo: iStock)
2. Adjustable Life (AL)
AL combines elements of traditional, fixed-premium ordinary life insurance and the ability–within limits–to alter the policy plan, premium payments, and the face amount. Essentially, one can view AL as IUL without the current assumption and equity-indexed interest crediting features.