How it works
You fund the policy above its minimum cost, and the surplus sits in an account credited according to an index — the S&P 500, most often — subject to a cap on the upside and a floor, usually zero, on the downside. You don't own the index and you don't receive its dividends. You receive a formula.
Policy charges come out of the cash value every month, and they rise as you age. Fund it well and it can run for life. Fund it thinly, or lean on an illustration built at an optimistic rate, and the charges can outrun the account decades from now — at which point the fix is expensive.
The three numbers to read
The most the policy will credit in a good year. It is set by the carrier and can usually be changed after you buy — so ask what it has actually been, not what it is today.
Usually zero: a bad year credits nothing rather than losing value. Charges still come out, so a zero-credit year is a small step backwards, not a flat one.
The assumption the whole projection rests on. Ask to see it run again two points lower. If the policy stops working, you're looking at a funding plan, not a product.
Against the other two
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| Term | Whole | IUL | |
|---|---|---|---|
| Lasts | 10–30 years | Lifetime | Lifetime, if funded |
| Premium | Level, lowest | Level, highest | Adjustable |
| Cash value | None | Guaranteed, slow | Index-linked, capped |
| Needs watching | At renewal | Rarely | Yearly |
A summary, not a quote. Actual features, costs, and guarantees are set by the carrier and the policy you're issued.