Here's something that might surprise you: while most insurance products are seeing modest growth or staying flat, indexed universal life insurance is absolutely booming. In the first quarter of 2025 alone, IUL sales jumped 11% to reach $959 million. By the third quarter, year-to-date premiums hit a record-breaking $3.2 billion—20% higher than last year. So what's driving this surge, and should you be paying attention?
The short answer is that IUL has evolved. It's not just for wealthy executives anymore. Simplified products have opened the door to middle-income families, and in an uncertain economy, people like the idea of growth potential tied to market indexes without the risk of losing money when markets drop. Let's dig into why IUL is having its moment and whether it makes sense for you.
What Is Indexed Universal Life Insurance?
Think of IUL as permanent life insurance with a twist. Like traditional universal life, it provides lifetime coverage and builds cash value you can borrow against. But instead of earning a fixed interest rate on your cash value, IUL ties your returns to a stock market index—usually the S&P 500.
Here's the key protection: you get a floor and a cap. When the market goes down, you don't lose money—your policy typically guarantees you won't earn less than 0% or 1%. When the market goes up, you participate in those gains up to a cap, usually somewhere between 10% and 13% annually. You're giving up the chance for unlimited returns in exchange for never losing money when markets crash.
Your cash value grows tax-deferred, and you can take tax-free loans against it in retirement. Plus, your death benefit passes to your beneficiaries income-tax-free. For people who've maxed out their 401(k) and IRA, IUL offers another bucket for tax-advantaged wealth building.
Why IUL Is Exploding in 2025
The 11% jump in Q1 2025 didn't happen by accident. Several factors converged to make this IUL's breakout year.
First, simplified products changed the game. Insurance companies realized they were missing a huge market—people earning $75,000 to $150,000 who wanted the benefits of IUL but didn't need million-dollar death benefits. These streamlined products feature faster underwriting, lower premiums, and less complexity. About 75% of IUL carriers reported growth in early 2025, and half saw double-digit increases. That's the simplified product effect.
Second, economic uncertainty is driving demand. When inflation is persistent and the stock market feels volatile, people want downside protection. IUL's floor—that guarantee you won't lose money—becomes incredibly appealing. You get exposure to market growth without the stomach-churning drops. In an uncertain economy, that peace of mind sells.
Third, high-income earners are maxing out traditional retirement accounts and looking for additional tax-advantaged vehicles. If you're already contributing the maximum to your 401(k) and IRA, IUL offers another way to build wealth with tax-deferred growth and tax-free access in retirement. For doctors, business owners, and executives earning six figures, IUL fills a gap in their financial plans.
Finally, the product itself has improved. Carriers have introduced new index options, reduced fees on some products, and expanded distribution channels. More financial advisors are recommending IUL as part of diversified financial plans, and that's driving awareness and adoption.
Who Should Consider IUL?
IUL isn't for everyone, and that's okay. It works best in specific situations. Here's who should seriously consider it:
High-income earners who've maxed out their retirement accounts. If you're earning $150,000 or more and already contributing the maximum to your 401(k) and IRA, IUL gives you another tax-advantaged tool. You can build cash value that grows tax-deferred and access it tax-free in retirement through policy loans.
Business owners and entrepreneurs. If your income fluctuates—big years followed by lean years—IUL's flexibility is a huge advantage. You can adjust your premium payments based on cash flow, and you can use the policy for business continuity planning, executive compensation, or personal wealth building. IUL adapts to your needs.
Parents planning for education and legacy. Unlike a 529 plan that's limited to education expenses, IUL cash value can be used for anything—college tuition, a down payment on a house, starting a business. You maintain life insurance protection while building a flexible financial resource your family can tap when needed.
People seeking estate planning tools. If your estate exceeds $1 million and you want to efficiently transfer wealth to heirs, IUL's tax-free death benefit is powerful. It passes to beneficiaries without income tax, and if structured properly, can minimize estate taxes too.
On the flip side, IUL isn't ideal if you're just looking for basic life insurance coverage, if you earn under $50,000 annually, or if you need coverage for only 10-20 years. In those cases, term life insurance is almost always the better choice—it's simpler, cheaper, and gives you pure protection without the complexity.
What You Need to Know Before Buying
IUL is powerful, but it's also complex. Before you buy, understand what you're getting into.
Costs matter—a lot. IUL policies have higher fees than term life because you're paying for insurance plus the investment component. You'll pay for cost of insurance, administrative fees, and sometimes premium expense charges. These fees eat into your cash value growth, especially in the early years. Make sure you understand the total cost structure before committing.
Caps and participation rates change. That 12% cap you see today? Insurance companies can adjust it annually based on market conditions and interest rates. If rates drop, your cap might drop to 9% or 10%. You need to understand that your returns aren't guaranteed—they depend on both market performance and the insurer's cap settings.
It's a long-term commitment. IUL works best if you keep it for 15-20 years or longer. Surrender charges in the first 10-15 years mean you'll lose money if you cancel early. Think of IUL as a decades-long financial tool, not something you can easily exit if your circumstances change.
Policy loans have consequences. Yes, you can borrow against your cash value tax-free, but those loans accrue interest. If you don't repay them, they reduce your death benefit. If your policy lapses with an outstanding loan, you could face a surprise tax bill on all the gains. Loans are a powerful feature, but they require careful management.
How to Get Started with IUL
If IUL sounds like a fit for your situation, here's how to move forward intelligently:
Start by talking to a fee-only financial advisor or an insurance professional who represents multiple carriers. You want someone who can show you products from several companies and explain the differences honestly. Don't rely on illustrations alone—those projections assume everything goes perfectly, which rarely happens in real life.
Compare at least three policies from different insurers. Look at the guaranteed values, not just the projections. Check the insurer's financial strength ratings—you're making a multi-decade commitment, so you need a company that'll be around. Review the fee structure carefully and ask about historical cap rates to see how they've adjusted over time.
Make sure IUL fits into your overall financial plan. You should already have an emergency fund, be contributing to a 401(k) or IRA, and have adequate term life insurance if you need it. IUL is a sophisticated financial tool that works best as part of a comprehensive strategy, not as your only approach to insurance or retirement planning.
Finally, be realistic about your premium commitment. Can you afford to fund this policy for 15-20 years? Life happens—job changes, economic downturns, unexpected expenses. You need to be confident you can maintain premium payments through different life circumstances. If there's any doubt, consider a smaller policy or stick with simpler coverage options.
The 2025 boom in indexed universal life insurance isn't hype—it reflects real demand for flexible, tax-advantaged financial tools that offer growth potential with downside protection. For the right person in the right circumstances, IUL delivers real value. Just make sure you're that person before you sign on the dotted line. Ready to explore your options? Get personalized quotes and speak with licensed insurance professionals who can help you determine if IUL fits your financial goals.
