Among the newer innovations in the universal life domain is indexed universal life (IUL), a type of policy that ties the cash value’s crediting to a market index, such as the S&P 500. While this might appear similar to variable universal life on the surface, there are important distinctions:

• Investment Control: IUL typically credits interest based on index movements rather than letting you pick subaccounts. You don’t invest directly in the market, so negative returns may be buffered by “floors,” but high returns might be capped.
• Risk and Reward: IUL can provide downside protection in some cases, meaning your credited interest won’t drop below zero if the index performs poorly, though policy fees still apply. By contrast, VUL can see actual losses in subaccounts.
• Complexity of Credits: IUL policies often involve intricate participation rates, caps, and spreads. VUL is usually more straightforward in that subaccount returns flow directly into your cash value, minus fees.

Individuals who desire market-driven growth but still want some guardrails may lean toward IUL, while those who prefer direct market participation and the potential for higher gains might opt for VUL. Both products demand close attention to fees and policy details.