IUL policies come with what is known as a “0% floor guarantee”. What this means is that you profit when the index is profitable but that you LOSE NOTHING when the index loses. This video explains this:
Between 2007 and 2009 the S&P plummeted more than 50%. This directly and negatively impacted people with 401k and other products that directly win or lose based on market behavior. In great contrast, Indexed Universal Life policies either profited or maintained their guaranteed 0% floor during this time.
During a down-market, to gain 0% is a win of sorts: while everyone else is losing their shirt, contemplating foreclosure and seeing their planned retirement go up in smoke, you simply maintained your wealth until the Big Bad Wolf finished huffing and puffing. At which point, you continue to gain profits as the particular index continues to rise.
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