Whole Life vs. Indexed Universal Life (IUL)

Whole life vs. indexed universal life insurance reveals the pros and cons of permanent life insurance. Whole life insurance is better for general life insurance savings, while indexed universal life insurance is better for those who want to make high-interest return investments. Compare multiple companies and shop around to find the best life insurance rates.

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Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health in...

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Benjamin Carr was a licensed insurance agent in Georgia and has two years' experience in life, health, property and casualty coverage. He has worked with State Farm and other risk management firms. He is also a strategic writer and editor with a background in branding, marketing, and quality assurance. He has been in military newsrooms — literally on the frontline of journalism.

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Reviewed by Benji Carr
Former Licensed Life Insurance Agent

UPDATED: Dec 16, 2020

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Whole Life and Indexed Universal Life Facts

  • Indexed universal life insurance is a permanent life insurance type with stock market investment opportunities built into the policy.
  • Whole life insurance is a general permanent life insurance policy without the benefits of the stock market investment.
  • Permanent life insurance has different purposes.
  • Term life insurance is cheaper than permanent life insurance.

This whole life vs. indexed universal life insurance guide will explain the difference between indexed and whole life insurance, the purpose of each policy, and where you can buy them.

Whole life insurance and indexed universal life insurance are permanent life insurance policies that have more expensive term life insurance quotes but carry savings and investment perks.

If you want to know more about affordable life insurance quotes outside of our whole life vs. indexed universal life insurance guide, enter your ZIP code in the FREE comparison tool above.

Whole Life Insurance vs. Indexed Universal Life Insurance

Both whole life and indexed universal life (IUL) insurance are permanent life insurance policies. However, they work differently. This section will focus solely on what these two life insurance types do.

Indexed Universal Life Insurance

IUL is a new type of life insurance policy that involves an equity index.

An IUL policy takes part or all of your monthly premium to invest in specific investments, but it’s a risky life insurance option with many complex ideas on investing in different contracts.

Whole Life Insurance

If you want a life insurance policy to last your entire life with general savings, get a whole life insurance policy. It’s an easier policy to understand. You can cash out your whole life policy, switch it to another company, and even borrow money against death benefits.

Similarities

Permanent life insurance policies accumulate a cash value in addition to the death benefits. Indexed universal life and whole life insurance have flexible premium payments.

Also, you’re allowed to borrow money against your death benefits. If you pay back the loan from the life insurance company before you pass away, your life insurance payout won’t be affected.

Differences

Whole life insurance is a much simpler life insurance option, but indexed universal life insurance is more complicated. Indexed universal life insurance carries a reward of higher interest rate return for policyholders.

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How much are whole life and indexed universal life insurance?

We know all about the similarities and differences between whole life and indexed universal life insurance. For this section, we’ll explore the cost of these two permanent life insurance policies. Let’s start with whole life insurance rates.

Average Monthly Whole Life Insurance Rates by Age
AgeAverage Monthly Whole Life Insurance Rates (Payable Until 65)Average Monthly Whole Life Insurance Rates (Payable Until 99)Average Monthly Whole Life Insurance Rates (Payable Until 121)
20-Year-Old Policyholder$85$73$58
30-Year-Old Policyholder$122$99$82
40-Year-Old Policyholder$196$145$123
50-Year-Old PolicyholderN/A$224$180
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Your whole life insurance policy is most affected by age and health. Most of your premium will go toward savings, while a small portion goes toward life insurance.

Now, let’s review the cost of index universal life insurance per month.

Indexed Universal Life Insurance Rates by Age and Gender
Age GroupIndexed Universal Average Life Insurance Rates Per Month for Male PolicyholdersIndexed Universal Average Life Insurance Rates Per Month for Female Policyholders
25 - 35$96 - $122$71 - $96
35 - 45$122 - $171$96 - $148
45 - 55$171 - $303$148 - $238
55 - 65$303 - $491$238 - $445

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Indexed universal life insurance is more expensive than whole life insurance. If you have an effective IUL strategy, you can reap a lot of rewards.

What happens to cash values?

Cash values build up as you pay your premiums per month. Death benefits are coverage amounts that are paid out to beneficiaries after a life policyholder has passed away.

In permanent life insurance policies like whole life and indexed universal life, cash values accumulate. You can cash out these values to another policy or in a check.

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Making a Decision Between Whole Life and Indexed Universal Life Insurance

If both policies are within your budget, it’s time to select which policy is better for you. Anyone interested in an equity index should get an IUL policy. However, it would be best to consider whole life insurance for a well-rounded permanent life insurance policy.

Cash Flow Banking Strategy

The cash flow banking concept, or infinite banking, says a life insurance policyholder can borrow money against its coverage amount. As you pay back the loan, your cash value accumulates, and your life insurance benefits continue.

Talk with a Finance Professional

If you want to invest in an indexed universal life insurance policy, get advice from a finance professional. IUL policies are very complex and require strategic planning for reliable results.

According to the United States Securities and Exchange Commission, IUL involves investment in market indices like the DOW, NASDAQ, and S&P 500.

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Whole Life vs. Index Universal Life Insurance: The Bottom Line

It’s in your best interest to choose a life insurance savings program that’s easy to handle. IUL policies take a lot of work to manage for the average person. A simple whole life insurance policy can save you money and bring peace of mind.

Ready to buy life insurance? Compare life insurance to the rates in our whole life vs. indexed universal life insurance by entering your ZIP code in the FREE online quote tool below.

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