IUL: Offering stability amid trade tariff uncertainty

Protection is the new performance in today’s volatile market environment, and that is why so many consumers are turning to indexed universal life.

That was the word from Jared Nepa, senior vice president and head of insurance solutions distribution for Lincoln Financial Distributors. Nepa spoke with InsuranceNewsNet about IUL and its protection against the market volatility that has made headlines and given investors heartburn in recent weeks.

In 2024, IUL new premium totaled a record-high $3.8 billion in 2024, up 4% from prior year, according to LIMRA. Policy count grew 10% year over year.

“Volatility is on the minds of many investors,” Nepa told InsuranceNewsNet. “I think what makes IUL unique in general, is the fact that it has the combination of what consumers are really looking for.”

IUL: Built to do what consumers want

Nepa said Lincoln’s research found that consumers want products that offer protection but they don’t want to sacrifice too much upside.

“When you think about IUL and the way it's priced and the way it's designed, it's built to do what consumers are looking for – particularly in time of high volatility,” he said. “You have a level of floor protection that protects the consumer against market loss. The advantage of that in this volatile market is that at least you’re not fearing the loss of your assets.

On the other side, he said, the stated cap or level of participation can impact how much upside the policyowner can capture.

“So finding that balance where IUL can come in and offer protection of your assets as the floor offering wile still providing what some would consider reasonable or meaningful upside to the tune of 6%, 7%, 8% is the trade that many consumers find they are more interested in making.”

Clients seek tax efficiency

Nepa said advisors are telling him their clients are looking for tax-efficient strategies and considering life insurance for estate-planning needs. “I think it’s a clear-cut sign that clients are interested in looking at what an IUL offers,” he said.

Two types of clients are ideal prospects for IUL in a volatile environment, Nepa said.

“The first is a client who wants to pass along assets in a tax-efficient way but is looking for more of a steady cash value experience, as opposed to a variable product.”

The second client is someone who already has maxed their retirement investments and is looking for another vehicle.

“Maybe somebody has already filled their 401(k) bucket, already filled up their Roth or traditional IRA, so their tax-advantaged or tax-deferred investment strategies are pretty much filled up. They can look to life insurance, and particularly IUL, to invest money with the floor, with reasonable upside capture based on the carrier's cap that they're offering. They can grow that asset for 10, 15, 20 years, and then loan off of that asset for a tax-deferred income stream to help supplement their overall retirement plan.”

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Susan Rupe is editor in chief, magazine, for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at susan.rupe@innfeedback.com.