Indexed Universal Life (IUL)

An IUL is a Universal Life Insurance policy where the interest credited to your Cash Value follows a market index — most commonly the S&P 500 — without being invested in it. A floor (typically 0%) means an index crash credits you nothing rather than costing you money; a cap or participation rate limits how much of the upside you collect. Index gains 20%, your cap is 10% — you're credited 10%. Index drops 30% — you're credited 0%.

Important nuance: 0% floor is not 0% loss. Policy charges — cost of insurance, riders, admin fees — still come out of the cash account in a flat year, so the real floor is slightly negative. And the moving parts move: insurers can lower caps and participation rates on in-force policies, and many did through the 2010s.

Done well, IUL is a legitimate accumulation tool. Maximum-funded (just under the Modified Endowment Contract (MEC) line), minimum death benefit, from a strong carrier, it can deliver tax-advantaged growth with real downside protection — the design logic behind many LIRP (Life Insurance Retirement Plan) strategies. Done badly — underfunded, sold on an 8% illustration, bought for the brochure — it's the policy most likely to generate an angry letter in your 70s.

The whole-life-versus-IUL debate is mostly tribal; the honest answer is side-by-side illustrations. Whole Life Insurance wins on guarantees, dividend history, and predictability — the qualities Infinite Banking depends on. IUL wins on upside potential in strong index decades. Jason Herring's practice at I&E is built on showing both without an agenda, because the right answer depends on the client's goal, not the agent's favorite product.

If you're evaluating one, stress-test the illustration at 2–3% lower crediting than shown, check the carrier's cap-reduction history, and confirm the policy still works when you stop paying premiums at retirement. Those three checks catch most future disappointments.