--- title: Indexed Universal Life vs. Whole Life; Which is best for your client? description: Which is better for cash accumulation or which is better for death benefit. There is more to consider than dividend rates and IUL caps image: https://blog.advisors-resource.com/hubfs/tax%20benefits%20of%20life%20insurance.png --- [Skip to content](https://blog.advisors-resource.com/blog/indexed-universal-life-vs-whole-life-best-client#main-content) ![advisors-resource-company-logo-horizontal-full-color-green-1](https://blog.advisors-resource.com/hs-fs/hubfs/advisors-resource-company-logo-horizontal-full-color-green-1.png?width=150&height=65&name=advisors-resource-company-logo-horizontal-full-color-green-1.png) - [Home](https://advisors-resource.com/) - [Who we Serve](https://advisors-resource.com/who-we-serve/) Show submenu for Who we Serve - [CPAs](https://advisors-resource.com/cpas/) - [Business Owners](https://advisors-resource.com/business-owners/) - [Financial Professionals](https://advisors-resource.com/financial-professionals/) - [Webinars & Blogs](https://advisors-resource.com/webinars-case-studies/) Show submenu for Webinars & Blogs - [Our Blog: Industry Insider](https://blog.advisors-resource.com/blog) - [Webinars](https://advisors-resource.com/webinars-case-studies/) - [Contact](https://advisors-resource.com/contact-us/) Open main navigation Close main navigation - [Home](https://advisors-resource.com/) - [Who we Serve](https://advisors-resource.com/who-we-serve/) Show submenu for Who we Serve - [CPAs](https://advisors-resource.com/cpas/) - [Business Owners](https://advisors-resource.com/business-owners/) - [Financial Professionals](https://advisors-resource.com/financial-professionals/) - [Webinars & Blogs](https://advisors-resource.com/webinars-case-studies/) Show submenu for Webinars & Blogs - [Our Blog: Industry Insider](https://blog.advisors-resource.com/blog) - [Webinars](https://advisors-resource.com/webinars-case-studies/) - [Contact](https://advisors-resource.com/contact-us/) Nov 15, 2017 7:34:43 PM # Indexed Universal Life vs. Whole Life; Which is best for your client? [Travis Pence](https://blog.advisors-resource.com/blog/author/travis-pence) Share: [facebook-f icon](http://www.facebook.com/share.php?u=https://blog.advisors-resource.com/blog/indexed-universal-life-vs-whole-life-best-client) [linkedin-in icon](http://www.linkedin.com/shareArticle?mini=true&url=https://blog.advisors-resource.com/blog/indexed-universal-life-vs-whole-life-best-client) [Twitter icon](https://twitter.com/intent/tweet?url=https://blog.advisors-resource.com/blog/indexed-universal-life-vs-whole-life-best-client) [pinterest-p icon](http://pinterest.com/pin/create/link/?url=https://blog.advisors-resource.com/blog/indexed-universal-life-vs-whole-life-best-client) [envelope icon](mailto:?body=https://blog.advisors-resource.com/blog/indexed-universal-life-vs-whole-life-best-client) > ##### “Six in 10 workers report they have less than $25,000 in total savings and investments; including 36 percent who have less than $1,000.” > > ##### **- Employee Benefit Research Institute and Greenwald & Associates** ###### 1 Retrieved from: 2014 Retirement Confidence Survey, Employee Benefit Research Institute and Greenwald & Associates (http://www.ebri.org/pdf/surveys/rcs/2014/rcs14.fs-6.prep-ret.final.pdf)   ### Comparing the Policies   Two popular permanent insurance policies available are Whole Life policies, which yield a guaranteed fixed return, and Indexed Universal Life policies, which allow for participation when the market goes up and principal protection if the market goes down. These products may benefit those who wish to provide for their loved ones after they pass away as well as those who wish to accumulate cash value on some of the money paid into their life insurance policy. However, the key differences between these products makes each more attractive for people with differing needs. Determining which is better for you depends on your personal situation.   ### [Indexed Universal Life](https://lp.advisors-resource.com/indexed-universal-life-insurance-rl)   As you may already know, Indexed Universal Life (IUL) insurance is a type of permanent life insurance. Compared to a standard whole life insurance policy, where there is a given (and usually quite low) rate of return on the cash value, the indexed universal life insurance policy allows you to “earn” a market return on your cash value based on an index, thereby mimicking the performance of the overall stock market. Indexed Universal Life An IUL policy may be used to accumulate substantial retirement savings as well as provide for beneficiaries should the owner die prematurely. Because the money paid toward this product has already been taxed, withdrawals, and or loans, can be made tax-free. This tool benefits policyholders who wish to generate savings at a lower tax rate than they may encounter in the future. As mentioned before, IUL policies mimic a specific stock index, such as the S&P 500, and provide returns based on market performance. Once the cash value has built up to a substantial level, the client can begin taking tax-free withdrawals/loans to supplement their retirement income. With an IUL, only the premiums that are not used towards life insurance coverage are used to build tax-deferred cash value. And since an IUL is used for life insurance, as well as a cash accumulation tool, the owner’s age and overall health can have a huge impact on premium costs, which would ultimately hurt the accumulation. However, the added death benefit of the IUL, pays tax-free dollars to the designated beneficiaries should the owner die prematurely. Although IULs can generate a considerable amount of cash value, this product must be well-funded by the owner in order for it to perform as intended. Allowing the policy to lapse can actually leave the policyholder with a large tax bill, so the owner should be advised that this is a long-term planning strategy with potentially significant penalties if the policy is surrendered or lapses.   ### Whole Life   A standard whole life policy has a level annual premium that must be paid each year for as long as the insured lives. Whole life insurance builds up an internal cash value that reduces the amount of death benefit the insurance company has at risk. If a policy is surrendered, the cash value would be paid out to the owner. A participating whole life policy can earn dividends or interest on top of the guaranteed cash value, based on the insurance company's results. The extra cash can be used to increase the death benefit or pay a part of the annual premium. Cash values of a whole life policy can never regress, regardless of external market conditions. However, these values accumulate at typically a much lower average rate than an IUL. Although the rate of return in an IUL may decrease over a number of years, there is usually a set limit, or floor, that the rate of return may drop too.   ### Compare and Contrast   At face value, a whole life policy may seem like the best option since cash values of a whole life policy can never regress, regardless of external market conditions. But when looking at the potential rate of return, a whole life policy will generally accumulate at a rate of 3-4 percent, whereas an IUL will generally perform around 7 percent with a cap as high as 14%. Also, policy contributions and premium payments are flexible making them attractive for tax purposes because of its tax-deferred growth; cash value won't decrease if the target index falls. On the other hand, premium payments in a whole life policy are usually fixed and cannot change throughout the life of the policy. Although a whole life policy may be better suited for conservative consumers who are looking for guaranteed returns, an IUL is best for those who wish to maximize their cash value growth potential. Ultimately, a person who wants to purchase either of these products should consider all their options and seek the advice of an independent financial or insurance professional to decide which method is right for their personal situation. [Finance](https://blog.advisors-resource.com/blog/tag/finance), [Uncategorized](https://blog.advisors-resource.com/blog/tag/uncategorized) ## Related posts [![life insurance retirement plan (1)](https://blog.advisors-resource.com/hs-fs/hubfs/life%20insurance%20retirement%20plan%20(1).png?height=200&name=life%20insurance%20retirement%20plan%20(1).png)](https://blog.advisors-resource.com/blog/life-insurance-as-an-asset-class) [Finance](https://blog.advisors-resource.com/blog/tag/finance), [Life Insurance](https://blog.advisors-resource.com/blog/tag/life-insurance), [Asset Class](https://blog.advisors-resource.com/blog/tag/asset-class), [Insurance](https://blog.advisors-resource.com/blog/tag/insurance), [Retirement](https://blog.advisors-resource.com/blog/tag/retirement) ## [Life Insurance as an Asset Class](https://blog.advisors-resource.com/blog/life-insurance-as-an-asset-class) [Travis Pence](https://blog.advisors-resource.com/blog/author/travis-pence) May 22, 2018 9:58:20 AM Many people do not view life insurance as an asset class, an essential and vital part of their... [Read more](https://blog.advisors-resource.com/blog/life-insurance-as-an-asset-class) [![life insurance ](https://blog.advisors-resource.com/hs-fs/hubfs/ARC%20Headers-1.png?height=200&name=ARC%20Headers-1.png)](https://blog.advisors-resource.com/blog/now-is-the-best-time-to-buy-life-insurance) ## [Now Is The Best Time To Buy Life Insurance](https://blog.advisors-resource.com/blog/now-is-the-best-time-to-buy-life-insurance) ![Picture of The Advisors Resource Team](https://blog.advisors-resource.com/hs-fs/hubfs/advisors-resource-company-profile-image-green-white.jpg?width=50&name=advisors-resource-company-profile-image-green-white.jpg) [The Advisors Resource Team](https://blog.advisors-resource.com/blog/author/the-advisors-resource-team) Jun 22, 2020 12:32:22 PM If you are in the market to purchase life insurance, now may be the best time to move forward.... [Read more](https://blog.advisors-resource.com/blog/now-is-the-best-time-to-buy-life-insurance) [![Whole Life vs IUL](https://blog.advisors-resource.com/hs-fs/hubfs/Whole-Life-vs-IUL.jpg?height=200&name=Whole-Life-vs-IUL.jpg)](https://blog.advisors-resource.com/blog/whole-life-vs-guaranteed-iul) [Life Insurance](https://blog.advisors-resource.com/blog/tag/life-insurance), [Indexed universal life insurance](https://blog.advisors-resource.com/blog/tag/indexed-universal-life-insurance), [permanent life insurance](https://blog.advisors-resource.com/blog/tag/permanent-life-insurance), [Universal Life Insurance](https://blog.advisors-resource.com/blog/tag/universal-life-insurance) ## [Whole Life has made a comeback – is Guaranteed IUL a better choice?](https://blog.advisors-resource.com/blog/whole-life-vs-guaranteed-iul) ![Picture of Ralph Pence](https://app.hubspot.com/settings/avatar/d41d8cd98f00b204e9800998ecf8427e) [Ralph Pence](https://blog.advisors-resource.com/blog/author/ralph-pence) Nov 14, 2021 3:00:00 PM Whole life insurance has been around a long time… Its origins date all the way back to the 1760's.... 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