IUL Calculator

IUL stands for indexed universal life, a form of permanent life insurance that credits interest tied to a stock market index instead of paying that index's actual return. An IUL calculator, sometimes called an index universal life insurance calculator, projects what a policy is actually worth. It applies the cap, the participation rate, and the rising cost of insurance, then subtracts each from the index gain the policy is credited. A sales illustration usually skips that math. This calculator runs it in full, using the cap and cost figures you enter rather than generic defaults.

An indexed universal life policy is life insurance with a savings component. It is usually a poor substitute for a retirement account. On the projection above, the policy ends at $583,785 while the same dollars in a 401(k) with a 50% match reach $1,520,634. It fits a narrow case: someone already maxing every tax-advantaged account who also needs a permanent death benefit and will fund the policy well above its minimum. It is worth it only for that narrow case, and it is not worth it as a first retirement account. That narrow case rarely extends to buying the policy on a child instead of an adult — see what an IUL for kids actually costs before running that math separately. An IUL is relatively safe against a market downturn: the 0% floor means a bad index year credits 0% instead of a negative number. It is not safe against the policy's own charges, which still come out of cash value even in a 0% year. In year 23 of the projection above, the index fell 8.3% and the policy credited 0%. Cash value still dropped $1,370 that year, because the cost of insurance and the admin fee were deducted regardless. If you are choosing between a policy and an unfunded 401(k) match, the match wins on arithmetic that is not close.

There is no standard monthly cost, because the charge depends on your age, health, the death benefit, and the carrier's own rate table. The shape is predictable: the cost of insurance is charged on the death benefit minus your cash value, and the rate per $1,000 rises every year you age. On the assumptions loaded above, the annual charge starts at $1,219 and totals $49,109 over 30 years. Ask any agent for the policy's guaranteed maximum charges. The illustrated ones are not the number to plan on. Enter the guaranteed figures here. Premium and cost of insurance are two different numbers, and mixing them up is the most common source of confusion. You pay the premium in: $12,000 a year on the assumptions loaded above. The policy pays the cost of insurance out of your cash value to cover the death benefit. On those same assumptions, that charge starts at $1,219 in year one and rises every year you age, totaling $49,109 over 30 years. The price quoted upfront is the premium. The cost of insurance is a separate, ongoing charge that keeps rising even after premiums stop.

The charges keep coming out of cash value until the cash value runs out, and then the policy lapses and the coverage ends. This is the most common way an indexed universal life policy fails. Set the premium low against a large death benefit in the calculator above and you can watch it happen. At $2,400 a year against a $750,000 death benefit, the policy lapses in year 7, at age 46, after $16,800 of premiums. If a lapsed policy has gain in it, a tax bill can follow the loss of coverage.

This calculator projects the death benefit for every year of the policy, alongside cash value and surrender value, using the premium, cap, and cost-of-insurance inputs you enter. It also approximates the section 7702 corridor that keeps the death benefit above cash value as the policy grows, the same adjustment that keeps the cost-of-insurance charge accurate. The death benefit is not guaranteed to stay level. If cash value runs out, the policy lapses and the coverage, including the death benefit, ends with it. On $2,400 a year against a $750,000 death benefit, that happens in year 7, at age 46, after $16,800 of premiums.

Yes, on most products, and this is the single most important question to ask before you sign. The cap is typically declared by the carrier and can be reset on a policy already in force. The rate in your illustration is not a rate you are owed. Two things are contractual. The guaranteed minimum floor and the guaranteed maximum charges hold. Ask which elements of your specific policy are guaranteed in writing, then run this calculator again with the cap lowered to see what the downside looks like. See how that redeclaration risk actually plays out across specific carriers in our guide to IUL illustrations by carrier.

The floor sets a minimum on the credited interest rate. It does not set one on your balance. In a year the index falls, the policy credits 0% instead of a negative number, which is real protection against market loss. The policy charges are still deducted from cash value that same year. Toggle the year-by-year table and watch a 0% year after your premiums stop. The balance still shrinks. The floor stops a negative credit and does nothing about the charges.

This calculator does not assume one fixed growth rate. It runs the index return you enter, year by year, through the participation rate, cap, and floor you set, then shows the rate that gets credited to cash value. On the assumptions loaded above, a 100% participation rate and a 9% cap turn a 19.7% index year into a 9% credited year. Over 30 years, that produces a surrender value of $583,785, against $1,277,172 for the identical policy with no cap. The gap between those two numbers is the credited growth after the cap and the cost of insurance take their share. Plan around that number, since the index's own return never reaches the policy in full.

Infinite banking usually describes an overfunded whole life policy rather than an indexed universal life one, so the crediting mechanics differ. The cost structure is the same idea: premiums go in, charges come out of cash value, and you borrow against what is left. A policy loan is not free money. It is a loan against your own cash value that accrues interest and reduces the death benefit if you never repay it. Our infinite banking guide works through the break-even math, and our guide to borrowing against life insurance covers the loan mechanics.

Cash value is the running account balance inside the policy, the number this calculator tracks year by year as premiums, credited interest, and the cost of insurance move through it. It is not the same as surrender value. Surrender value is the amount the carrier would actually pay you to cancel before the surrender charge phases out. In year 1 of the projection above, cash value is $10,956 while surrender value is $9,860, after $12,000 of premium paid. Cash value is also not the death benefit, which a beneficiary receives if you die while the policy is in force. Watch the cash value row against the cap and cost-of-insurance figures in the year-by-year table to see what moves it each year.

A surrender charge applies for the first several policy years. It grades down to zero on a schedule written into the contract. Cash value is the account balance. Surrender value is what the carrier would pay you to cancel. On the numbers above, year 1 shows $10,956 of cash value against $9,860 of surrender value, after $12,000 of premium. Ask for the surrender-charge schedule in writing before you sign, because it varies by product and by your age at issue.

Both accounts beat the policy on cost and access, and the 401(k) adds an employer match the policy cannot match. An indexed universal life policy has no federal contribution cap. A saver who has already filled every tax-advantaged account can keep putting money in. That is a real advantage for a small number of people. Our IUL vs 401k comparison and IUL vs Roth IRA comparison work through each decision, and the taxable vs tax-deferred calculator shows the three-way tax math on ordinary accounts.

No. It models the policy's cash value, charges, and surrender value, and it applies a tax rate only to the taxable brokerage baseline. It does not model modified endowment contract status, the IRC section 7702 premium limits, or how a policy loan is taxed. Each of those can change the outcome for a specific policy. It does approximate the section 7702 corridor that keeps a death benefit above cash value, because ignoring it would understate the cost of insurance. Treat every figure here as an illustration of the assumptions you entered.

Every number this calculator shows is an estimate built from the assumptions you enter. No carrier has approved or guaranteed it. This calculator runs on the cap, participation rate, and cost-of-insurance figures you enter. A carrier's in-force illustration runs on its own software and your policy's actual contract terms. Both show a similar year-by-year path: cash value, surrender value, and death benefit. This calculator does not model modified endowment contract status or the section 7702 premium limits in full. It also does not know how your specific carrier prices cost of insurance at your age and health rating. Use it to test how a cap change, a skipped premium, or a lower participation rate would move the numbers. Then confirm the result against an in-force illustration run at guaranteed maximum charges.