I get asked a lot about how Whole Life insurance differs from Indexed Universal Life insurance, particularly when it comes to retirement planning. In this presentation, I note the similarities between these forms of permanent insurance, the differences, and why you might use one instead of the other.

1. Between Whole Life and Variable,
and Indexed Universal Life

2. Presented by
Michael Grigsby
Retirement Evangelist
Freedom Equity Group
mike@fegnw.com | (541) 610-6375
fegnw.com and 2jam.com

3. • By way of review, there are two primary categories of life
insurance: term and permanent. Most common are:
Non permanent
Permanent
Term
Whole Life
ART (annually renewable
term)
Variable Universal Life
Indexed Universal Life

4. • Protection for a specified period, such as the time until a
home mortgage is paid off, or the kids are out of the
house.
• As an inexpensive insurance used to lock in insurability
until a permanent insurance can be purchased.
• An expendable insurance when living benefits are added,
used to protect the value of a permanent insurance.
• With some companies, a way of buying inexpensive
death and living benefits coverage now, and rolling over
part of your premiums into a permanent policy at a later
date, guaranteeing insurability and not losing all your
premium until then.

5. • Permanent life is most often used to ensure a death
benefit throughout the lifetime of the policy.
• Usually there is the ability to borrow against the policy for
emergencies, life events, like college or a down payment
on a home.
• If a policy has living benefits, the policy acts as a lifetime
catastrophic, chronic, and even disability protection
program.
• Some programs act as a retirement income replacement
program.
• Tax free funds.

6. • There are many types, but let’s briefly look at three:
• Whole Life – Usually sold for its permanent death insurance and
ability to borrow against when needed. Growth of the policy is
normally through dividends and interest rates, providing modest
growth.
• Variable Universal Life – Sold as an investment and retirement
vehicle, falling short and disappointing policy holders during the
2008 crash. It invested funds directly in the stock market, and
illustrations failed to account for such a stock market crash. While
still available, it is seldom sold, except to investors who can
handle risk. Gave other types of UL policies a bad reputation, and
the tool of choice used by financial advisors against insurance
instead of their qualified plans.
• Indexed Universal Life – Sold as an investment and tax free
retirement vehicle, indexed based, with protection from market
declines. Funds can be borrowed without touching the principle.
Growth is through call options, capping the amount of growth, but
protecting against market downturns.

7. • Let’s compare two popular permanent insurances: whole
and indexed universal life.
Whole Life
Indexed Universal
Life
Policy loans
Yes
Yes
Used as a generational
bank account
Yes
Yes
Provide a death benefit
(face value)
Yes
Yes

8. • How do whole and IUL differ?
Whole Life
Indexed Universal
Life
Premiums
Fixed
Flexible
Death Benefits
Fixed
Adjustable
Loan Interest Rates
Fixed or variable,
determined by policy
Fixed or variable,
policy owner’s choice
Over-loan protection
Maybe
Yes

9. Whole Life
Indexed Universal
Life
Cash Values
Guaranteed based on
assumed interest rates
of 3-4%, plus non
guaranteed dividends
declared by the
insurance company,
based on returns from
company investment
account.
Grow with index linked
to markets like S&P
500. Caps on gains of
13 to 14%. Hard floor
of 0%, and some with
guarantee of 3%.
Protection from down
market, and yearly
reset locks in gains.
Tax Free Retirement
Yes, by surrendering
dividends on cost
basis, then using policy
loans. Some policies
with only the policy
loan may perform
better.
Yes, when properly
structured, can
produce a lifetime of
tax free retirement
income, as long as
policy is in force until
death.

10. Whole Life
Owner Benefits
Indexed Universal
Life
Guaranteed Cash
Values scheduled in
contract, plus standard
non-forfeiture options Reduced Paid-Up and
Annuitization (partially
taxable).
Maximum Cash
Accumulation
Potential, with index
linked interest credits
upwards of 13-14% or
more per year, with
principal protection -No market risk, cash
values never lose
when the stock market
index is negative.
Annual reset. Flexible
premiums and
adjustable death
benefits. Some with
living benefits.

11. Whole Life
Downside
Indexed Universal
Life
Dividends are NOT
guaranteed. Industry
wide, dividends have
been trending
downward for the last
two decades, as long
term interest rates on
bonds have trended
downward. Whole life
premiums and death
benefits are NOT
flexible, generally.
Positive stock market
index growth is NOT
guaranteed. What this
means to you is that
cash values may earn
zero percent interest
when index is negative,
but that's actually a
positive result.

12. Whole Life
Which one is better?
Indexed Universal
Life
If client wants guaranteed
cash value growth with
some sacrifice on the
potential upside during
periods of stock market
index growth, or wants the
guaranteed option to elect
a Reduced Paid-Up policy
at some point in the
future, and have
substantial discretionary
cash flows so that the
non-flexible premium
schedule does not
present a problem, then
Dividend Paying Whole
Life maybe the best
choice.
If client wants maximum
non-guaranteed cash
value growth potential for
either a lump sum cash
need, a tax-free
retirement income stream,
or maximum nonguaranteed internal rate
of return on death, and
wants or needs a flexible
premium structure, then
Index Universal Life may
be the best choice.

13. • It is the client’s choice, but I believe the IUL is a better
overall vehicle for retirement.
• It isn’t up to you or me, it is up to the client to decide.
• It is important we can answer the client’s questions and
offer an informed option to the client.
• Clearly, those who do not sell IUL’s are not informed
about them.

14. • Contact Mike Grigsby (541) 6106375, or mike@fegnw.
• Contact me if you are not already
adding Freedom Equity Group
retirement products to your product
offering.