Whole Life Insurance Vs Indexed Universal Life

Do I buy whole life insurance? Do I buy indexed universal life insurance? Is it a competition? What do I do between the two? Slow down. Hold on for a moment. I'm Dave Harder. I'm with Epic Financial Strategies. What I'm here to talk to you about today is the differences between whole life insurance and indexed universal life insurance, and which one is going to be a good fit for you based off what you're trying to do. The most important type of life insurance is the type that is enforced when you die. Make no mistake about it. So it's not a competition between whole life insurance and indexed universal life insurance. It's simply trying to fit a square peg into a square hole. So let's talk about whole life insurance for a moment, the benefits, and also some of the things that you want to take into consideration if you're going to buy one. Whole life insurance is old steady yet. It's very, very predictable. There are guaranteed accumulation rates on the cash value. There's fixed premiums that won't fluctuate. There's guaranteed death benefit for the day that I pass away. And there's all types of living benefits that are attached to whole life insurance. When you're considering buying a whole life insurance policy, the first thing that you want to take into consideration is what's the premise behind my strategy? Am I going to be buying real estate? Am I going to be investing back into my business? Am I going to be investing into another business? Do I need borrowing power? Do I need leverage? Well, if you can check the box on all of those, a well-built whole life insurance policy could be a wonderful alternative for you. If you're someone who looks for fixed accumulation, who doesn't want to have market exposures, a whole life insurance policy is a great fit for you. If you're looking to try to essentially create a banking style system for yourself, a whole life insurance policy could be an excellent alternative for you. If you're concerned about extended healthcare, a whole life insurance policy could have features that could be a good fit for you. The nice part about whole life insurance policies is the borrowing features associated with them can be very predictable. And they can also be very advantageous if the accumulation inside of the policy is happening at a greater rate than what I'm borrowing at. And so therefore, I can invest in other things, hire ROIs, and simply return the money back to the policy. So it can operate almost like a banking structure from that standpoint. If I'm somebody who's anxious to get higher return opportunity, and I'm constantly going to be comparing the accumulation of the cash value in the whole life insurance policy to the market, a whole life insurance policy is probably not for you. You might want to take into consideration an indexed universal life insurance policy, or what we call an IUL. An important distinction about an IUL is to understand that the money is actually not invested in the market, but it can be benchmarked to a market. There's a big difference between the two. What I mean by that is that one of the choices that you have is to benchmark your money inside of the policy to a specific index. If that's the S&P 500 as an example, then the S&P 500 over a point-to-point basis is going to create a return. Your participation or the crediting to your money inside your policy can be benchmarked to that return. But here's the nice part. The nice part is if that return is negative, your money is credited at the floor rate. That could be 1%. It might be zero, but it wasn't the negative rate of return that happened in that benchmark during that period of time. Because one thing that we know is that negative returns in the market require massive risk and massive returns just to get back to break even. Another key feature of IUL is how I fund it. IUL has some unique features attached to it from the standpoint that there is a specific targeted premium attached to the contract that's going to keep the death benefit in force. Because remember, the premise is to keep the death benefit in force until the day that I die. So that's the targeted premium to keep the contract moving. But in addition to that, there are overfunding mechanisms. You can actually contribute greater than what the targeted premium is for the contract. And what that does is creates a sense of overfunding into the policy. The advantage there is that if the market is, if the crediting on the money that's tied to the market has a negative point-to-point experience, you're not only baseline, you're not only flat with your accumulation in the policy because you overfunded it, because you put more than what was required. The challenge with IUL is that if it's not funded the right way, interest rates change, markets change, you could be faced with a situation where you would have to put more money into the policy just to keep it alive. That's something that you don't want to be faced with. And so funding strategies for IUL are really, really important and things I talk to my clients about all the time. So we spent time talking about the positives, the attributes, and the things that you need to know about whole life insurance, and also with indexed universal life insurance or IUL. Listen, there is no right answer. Sometimes it makes sense for you to own both. Sometimes it makes sense for you to own only one or only the other. The good news is we've created free content and education on both of those strategies. Click the link below to get content on whole life insurance and indexed universal life insurance for you to understand which one is better for you.