Life · Chapter 4 · Universal & Variable
Indexed Universal Life (IUL)
Definition
A fixed (non-variable) UL whose interest is linked to an index (often the S&P 500) — the owner's money is not invested in the index. Upside is limited by a cap, participation rate, or spread, and the downside is limited by a guaranteed floor (typically 0%), so a market drop credits little or no interest rather than a loss. Not a security.
Exam tip
The cap, participation rate and floor are product terms, not law — they vary by contract. Policy charges can still shrink cash value in a 0%-credit year.
Easy to confuse with
These are what this term gets tested against — if you can't tell them apart cold, drill the contrast.
Related terms