Term vs. IUL: Which Life Insurance Is Right for Me?

The short answerTerm is usually the lowest-cost way to get a lot of protection for a set number of years. An IUL costs more but is designed to last for life and builds cash value linked to an index, with caps, floors and fees. If your main goal is protecting your family on a budget, term usually comes first. If you want lifelong coverage and can fund it for many years, an IUL may be worth a look.

Side by side

Cost: term is lower for the same death benefit; an IUL costs more because it includes cash value and lifelong coverage.
How long: term ends after the term; an IUL is designed for life if properly funded.
Cash value: none with term; an IUL builds it, subject to caps, the floor, fees and surrender charges.
Commitment: term is simple; an IUL works best when funded consistently for many years.

A common combination

Many families buy enough term to cover the big years and a smaller IUL for lifelong needs and long-term savings. You don't need a lot of money to protect your tomorrow, today.

Questions to ask before choosing an IUL

Can I comfortably fund this for 10 to 20+ years?
What happens if caps drop or I pay less?
What are the surrender charges, and for how long?
Do I already have an emergency fund and retirement savings?

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Related free tools

Family needs analysisAdd up debt, income, mortgage and education to get your own coverage number.FAST calculatorSee where money leaks each month and what you could redirect toward protecting your family.Mortgage coverage calculatorStart with your loan balance and monthly payment.

Common follow-up questions

Is IUL better than term?

Not better, different. Term is lower-cost protection; IUL adds lifelong coverage and cash value at a higher cost.

Can I convert my term to an IUL?

Some term policies allow conversion to permanent coverage, which may include an IUL, within their rules.

Will an IUL make me rich?

No product should be sold that way. Cash value growth is limited by caps and reduced by fees.

What if I can only afford one?

For most families on a budget, enough term coverage comes first.

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Term vs. IUL: which one is right for me?