Following up our episode from last week where we discussed how an indexed universal life (IUL) policy would have fared over the last 10 years, we thought it would be interesting to dig into THE most powerful aspect of IUL in our opinion–years when the market index has a negative return.
This is something we've talked about briefly in the past and we received some criticism. See, in every IUL contract there is some sort of floor for the years where the market index has a negative return. The floor can range from 0-2%–most contracts being offered today are at 0%.
So, in a year like 2008 where the market has a negative return, the worst you'd do is stay flat as it relates to the cash value of your IUL contract.
However, some have come along to point out that while this is true, you could still have a decline in your cash value due to policy expenses and cost of insurance. And technically that is true.
Yes, there is a cost for any type of insurance and I mean that in every possible context.
Our point in today's episode is that if you focus too much on that cost–you're missing the boat. You're focused on the wrong thing.