Is Indexed Universal Life Insurance A Good Investment? 
The methodology to determine if indexed universal life -LRB- IUL -RRB- is a good investment is the suitability of the investor . IUL is a long term commitment with surrender charges in the first 9-15 years that can be punitive , so the need for liquidity cant be a priority . Consumers who need liquidity are not suitable for IUL . Like all investments , IUL has policy expenses ; chief among them is the cost of insurance . If the insured is a smoker or the nonsmoking health classification is standard or substandard , the cost of insurance may be prohibited , so health becomes a suitability item . Additional policy expenses beyond the cost of insurance could also be a suitability consideration . The policy expenses are deducted from the premium . In a year that the index is negative , nothing is added to the index accumulating amount , but policy expenses are nevertheless deducted from the policy . Keep in mind that the S&P 500 was negative from 2001 - 2003 , and the average policy expense were greater than 4 % , so they generated a 4 % compounded loss over three years . And remember , thatdoes n'tinclude any surrender charges . The # 1 unaddressed policy expenses IUL as an investment is policy expense loans , which are generally illustrated with fixed or variable loan charges at current company practice . There are loan rate caps , regardless in a negative crediting year ; with the policy generating income the loan cost could be economicallynonviable . IUL must be designed with the least expense loads at the policy issue date . The investor must hold the contract for the life of the insured to maintain the minimal coverage purchased and tax advantages of life insurance income . A life insurance professional , whose expertise in the design and architecture of IUL as an investment is imperative . The vast majority of life insurance agents selling IUL woefully lack the training and knowledge to construct IUL as an investment . 