Best 5 IUL Companies For Cash Accumulation & Why

Below we reveal the top 5 IUL policies of 2024 and take a deep dive into the criteria deciding the best IUL companies for cash accumulation.

There is so much hype around IUL right now on social media, you must be careful before entering into what should be a lifelong financial contract.

You have to ask yourself, “Is this the top IUL policy for me, or is it the best IUL company for the agent?” Be sure your IUL agent is willing to stress-test their alleged top-performing product. All IUL companies can make their illustrations look amazing, so it’s imperative to see how their best IUL product performs at far less than projected performance.

Don’t get me wrong, an IUL can enhance retirement planning and even act as your own private bank along the way assuming your particular Indexed Universal Life policy is:

Chosen Wisely
Designed Properly
Funded Thoroughly
Monitored Regularly

If you are committed to these 4 IUL precepts, then you can generally avoid the common pitfalls you commonly hear about “why IUL is a bad investment”.

Since this product should last your whole life, you should fully understand IUL’s Pros & Cons before committing to which is the best IUL policy for you.

At Banking Truths we believe in providing education & modeling so you can decide if this strategy is a good fit for you:

Get all your questions answered
See the top policies modeled out
Never any pressure or hard pitches

The 4 Core Criteria To Vet Best IUL Companies for Cash Accumulation

Most agents and clients alike only focus on top-line growth when considering an IUL product.

They usually focus the bulk of their attention on some top-line metric like:

What’s the IUL cap?
Good-looking IUL illustrations
Some hyped-up IUL investment strategy (that will certainly change)

It reminds me of Tom Waits bemoaning how the “large print giveth…and the small print taketh away” in his classic song “Step Right Up”. Combine this with all the hype on TikTok and you have a lot of people ending up in sub-optimal products.

The 4 most important factors when vetting any of these best IUL policies will be:

Available Growth Options
Underlying Fee Structure
Participating Loan Rates
Company Reputation

Indexed Universal Life has so many moving parts at its core, not to mention all the potential bells and whistles different companies add to their policies.

Since both interest rates and market volatility have been a moving target, we did not want to post actual IUL cap and participation rates only to have them become obsolete a month or two later. Be sure to book your own custom call with one of our independent IUL expert brokers to learn the latest updates about the best IUL products and companies that offer them.

The Evolution of IUL (A Brief History)

If you’re intrigued with the best IUL for cash accumulation, then you may want to understand how Indexed Universal Life came to be since it essentially was spawned from its two predecessors Whole Life and Variable Universal Life.

Throughout most of the 1900’s the only life insurance products were Whole Life and Term. Term insurance provided lower costs for temporary coverage. Whole Life provided a guaranteed death benefit for a guaranteed level premium, but also had an attached savings component with a guaranteed permanent growth rate as well as non-guaranteed dividends.

In 1979 the investment brokerage E.F. Hutton invented a revolutionary new product called Universal Life by combining a dynamic savings component with the lower mortality costs of term life insurance.

The cost per unit of insurance started lower since UL’s cost structure is based on “annual renewable term”. However, the cost per unit of UL’s insurance becomes more expensive every year since clients will inevitably get older. The idea with Universal Life is that the growth of the savings account will reduce the amount of pure insurance in the policy which would bring down the rising cost per unit of insurance.

In 1986 shortly after the meteoric rise of UL, life insurance companies had the idea of adding an investment component. Since interest rates were starting to come down, insurance companies replaced the savings account with mutual funds, and Variable Universal Life (VUL) was born!

Investment companies heavily advertised VUL as “the last great tax shelter”. Sadly, the IRS and regulators took notice of these ads. This led to the IRS limiting how much premium anyone could pump into any permanent life insurance for future tax-free retirement income.

Regardless, as the stock market raged on throughout the 1990s, VUL became the insurance product of choice for cash accumulation.

In 1997, the first Indexed Universal Life product was invented by TransAmerica (not on the list of 2024 Best IUL companies).

At first, IUL didn’t make a big splash at all. Who would want to limit the stock market since everyone wins investing in Dot.Coms?

However, consumers would start to take notice of IUL as the S&P 500 lost over 50% of its value between 2000-2002 and again in 2008-2009.

I briefly recount the history for you to see that Indexed Universal Life is essentially a mashup product of sorts combining elements of Whole Life and VUL.

Not surprisingly nowadays, certain Whole Life products and VUL products offer IUL investments as potential growth options for their policyholders.

Understand exactly which insurance companies offer the most attractive fixed indexed crediting strategies today.

How IUL Works & The Best IUL Companies Build Their Products

Again the 4 core aspects to make up the best IULs for cash accumulation will have a combination of:

Low fees and ongoing cost of insurance
Competitive and Diverse IUL investment options
Contractually locked or capped loan options
A History of Treating Past Policyholders Fairly

IUL Policy Fees & Costs of Insurance

It’s about the bottom line: credits minus debits equals your equity in an IUL. Therefore, controlling costs should be as important (if not more) as your projected performance since performance may or may not occur. The underlying costs definitely will.

As you read in our history of IUL section above, Indexed Universal Life rides on a UL chassis. This is essentially an annual renewable term policy to give you the lowest initial cost of insurance. That way most of your early cash value can have the potential to grow in the underlying IUL investment strategies.

IUL’s cost per unit of insurance starts low when you’re young, but it becomes more expensive every year as you get older. However, with all the best IUL companies you only pay for the amount of death benefit that is over and above your IUL’s cash value (since you’re already technically entitled to it).

The intention with all the best IUL policies for cash accumulation is that your cash value growth will keep converging upon the death benefit once the cost per unit of insurance increases with age. Even though the insurance component becomes technically more expensive, you will be paying for fewer units of pure IUL insurance.

It’s very important to have your IUL agent stress-test your proposed policy with below-average crediting rates so you can understand the impact of any IUL fees if for whatever reason 2024’s best IUL policies don’t perform as well in the future as they were originally projected.

IUL Investment Options

Whatever part of your premium and cash value isn’t absorbed by fees and cost of insurance will be entitled to either a fixed rate of return (currently 3%-5%) since the best IUL companies invest heavily in bonds.

You can elect to have your cash value grow by this annually declared fixed rate OR you can choose one of the IUL investment options. When you elect indexed crediting, the best IUL companies take that 3%-5% fixed interest they were planning on paying you anyway, and they buy S&P 500 options with it.

Just as with any options strategy, your max loss will be the cost of the options themselves, hence the 0% floor. With many IUL investment options your upside will be greater than that 3%-5% bird-in-the-hand fixed rate option, but also limited by:

IUL Cap: The top-end upside ceiling when tracking the S&P 500
IUL Participation Rate: A percentage of S&P 500 gains captured (often 100% or less)

In today’s environment, the best IUL companies offer S&P 500 cap strategies currently between 9%-11% with a 100% participation rate. That means if you had say a 10% cap and a 100% participation rate, you can get dollar-for-dollar participation of S&P 500 indexed growth between 0% and 10%.

Although you probably want unbridled stock market participation from your long-term stocks and mutual funds, you may want to smooth that roller coaster ride for some portion of your savings, especially dollars you want to keep safe and liquid, but steadily growing.

Some IUL companies offer uncapped S&P 500 strategies with a 0% floor, no cap, and some kind of watered-down participation rate of say 40%-60%. That means in years after a big market drop you could earn half of the S&P 500 gains or so without worrying about market losses.

It’s worth noting that certain VUL companies offer higher participation rates of say 90% of uncapped S&P 500 growth. However, instead of the traditional 0% floor guaranteeing no market losses, these VUL companies charge a 3% fee, which effectively makes your 0% floor -3%.

Learn about which IUL companies offer the most robust indexed crediting strategies from one of our fixed indexed insurance experts.

IULs with VCIs: Volatility Control Indexes

Over the past few years Volatility Control Indexes (VCIs) have become increasingly popular among some of the best IUL companies. They are often designed and managed by household financial names like Barclays, Goldman Sachs, and J.P. Morgan.

Essentially, these exotic indexes are allocated by an algorithm that gives the client exposure between a stock market index and either bonds or cash depending on the level of volatility present in the market. The idea was that these VCIs would provide a steadier and smoother return for the best IUL policies and therefore a better result for clients.

However, it’s worth noting that the promises of these Volatility Control Index strategies have not panned out well for clients.

The fact that bonds have had negative returns in 2022 and a choppy 2023 contributed to the 0% crediting in these VCI’s. Also, certain VCIs offering more than 100% participation rate are using leverage within the algorithm which acts as a higher hurdle rate. Even though you still have a protective 0% floor, the hurdle rate to positive crediting within Volatility Control Indexes has gotten significantly higher as short term rates have spiked up.

In fact, we’ve seen multiple years of zero crediting whereas the pure S&P 500 indexed strategies have rebounded nicely.

Some agents believe the best IUL companies are the ones with the snazziest Volatility Control Index strategy. Even though the familiar names behind the design of these Volatility Control Index may be comforting to see, just beware that most VCIs were designed to excel in a low to no interest rate environment.

Some of the best IUL companies may have Volatility Control Index options available, but I would caution you against becoming overly impressed by back-tests cherry-picked showing a lower interest rate environment that is vastly different from the one we’re in now.

Be sure the best IUL policy for your situation should also have a solid S&P 500 option as well… maybe more than one!

IUL Loan Options

One last feature for that determines the best IUL companies is the type of participating loan available.

Assuming you’re following our formula for an IUL that’s chosen, designed, and funded properly, you can borrow against 90+% of your cash value with a locked loan rate between 5%-6%. Yes, some of the best IUL companies do have a locked loan rate of 5%. That way you can borrow against your cash value while it remains fully invested in the IUL crediting options.

Since interest rate volatility is likely to continue for some time, we believe the best IUL companies should offer some sort of locked or capped loan rates.

IUL is actually a unique hedge against interest rates:

If rates are low, you may be better off borrowing against outside lines of credit, collateralized loans such as auto loans, or even certain student loans while keeping your IUL compounding.
If rates are high, you can flip as much of the loan as possible to your IUL policy especially if it has a 5%-6% capped loan rate.

Keep in mind that you are allowed to first withdraw everything you put into an IUL on a tax-free basis. However, when you withdraw from an IUL you lose the compounding on that money vs. when you borrow against it.

Most people plan on taking tax-exempt loans from an IUL policy rather than withdrawals for two reasons:

Loans against any asset are not considered a taxable distribution (like with real estate or margin loans)
Some people plan to use IUL as their own private bank (using the infinite banking concept)
The best IUL companies offer opportunities for positive arbitrage (growth rates vs. loan rates)

Again, the intention with all the best Indexed Universal Life policies is that these indexed crediting strategies will outrun the underlying fees by such a wide margin that the policyholder hopes to draw massive amounts of tax-exempt income largely from IUL loans.

As of 2024 we’re finding that the best IUL companies offer lock or capped loan rates somewhere between 5%-6% while still offering full participation in some or all of their indexed crediting strategies.

Some people hear the word borrow and see red. However, when you look at this historical example remember that IUL cap rates were much higher in the past and may drift higher with higher rates.

As you can see below, the S&P experienced losses less than ¼ of the time in the last 86 years, and over ¾ of the time the S&P had positive returns. Further notice that in the positive years, you would’ve easily hit the cap ¾ of the time. If that’s the case, then wouldn’t it be better to keep that cash value working for you in the IUL investments by borrowing against IUL using a locked 5% loan rather than taking a tax-free withdrawal?

Having a locked or capped loan, allows you to pay simple interest on a flat or decreasing loan balance while earning compound interest on an increasing balance.

Watch a 6-minute video about how life insurance products like the top IUL policies can work as your own private bank and retirement vehicle.

Ancillary Features of The Best IUL Policies

Oftentimes insurance agents will over-hype certain ancillary features of a policy as if this is what determines who the best IUL companies are.

Chronic illness riders on an IUL are a nice feature, but most companies have some sort of free chronic illness rider built into their policy. If protection against chronic illness is your priority then perhaps you should consider the best policy for pure Long Term Care protection rather than the best IUL for cash accumulation.

Another popular feature that is catching attention is a “rate-lock” feature in certain IUL investment strategies where if you have positive crediting, then you can essentially lock it in at any point throughout the year.

Again, these features may sound attractive, but none will be as important as the combination of the 3 features described in the sections directly above:

Lean IUL Policy Fees
Robust IUL Investment Options
Locked IUL Policy Loan Options
IUL Company Reputation (with existing policyholders).

The best IUL companies will be very well-rounded in all these 4 core categories.

The Best IUL Companies Treat Past Policyholders Fairly

Therefore, it is important to consider the overall history of the insurance company and how it treats existing IUL policyholders.

Did the company once offer the top IUL policy, but then substantially change the game for the worse once they launched a new product to compete as best IUL policy?

You know how banks will offer a teaser rate to open a CD or savings account just to get new customer money in the door? You see certain IUL companies will subsidize these unrealistic new offerings by squashing what’s possible for their inforce policies.

Don’t get me wrong, all of the best IUL companies have had to lower caps and participation rates as rates kept getting lower and lower from 2009-2022. However, some IUL companies were more aggressive about lowering caps than others.

Furthermore, as rates ticked back up, we got to see which were really the best IUL companies by fairly raising caps, not only for their latest and greatest IUL policy but for all their existing policyholders.

We also saw how in the spirit of fairness some of the best IUL companies would lower their loan rate for clients simultaneously to lowering their S&P 500 caps.

Makes sense, right?
What’s right is right!

It’s worth noting that several of the best IUL companies have stated that the caps for their past products can’t be exactly equal to their current product offerings. This is because it may not be an apples-to-apples comparison since their old IUL products may have vastly different mortality assumptions, bonus structures, and even entirely different IUL investment methodologies.

The Best IUL Companies of 2024 & Why

IUL with Best Selection of Strategies: Allianz Life
IUL with Best Response to Rising Rates: Columbus Life
IUL with Best Company Strength: Nationwide
IUL with Best Chronic Illness Rider: National Life Group
IUL with Best S&P Strategies + Guarantees: Penn Mutual

We go into detail on each of these best IUL company categories below, but the best IUL caps and participation rates can change frequently.

For these reasons, we strongly recommend a complimentary consultation with one of our independent brokers who stay abreast of this rapidly changing market and can alert you to the latest news and opportunities.

Allianz – Best IUL Company with Diverse Indexed Crediting Strategies

Allianz has been competitive in the IUL space since they entered the scene over a decade ago.

Allianz happens to be the only stock insurance company on the list and a foreign stock company at that. Some clients worry that a German parent company may not have allegiance to American policyholders if economic times get tough, but others like the fact a foreign stock company has varied sources of earnings in diverse insurance markets.

As a major multi-national insurance company, Allianz is the only company on the best IUL company list that does all their own option hedging in-house to back their various indexed crediting strategies. Allianz not only has a lot of IUL investment options to choose from, but also different methodologies of how the various indexes can translate to crediting to your IUL policy as you can see below:

Quite frankly we’ve found so many IUL investment choices can be confusing to clients, but in terms of the most diverse selection of indexed crediting options Allianz definitely deserves a spot on the best IUL companies list.

What We Like About Allianz:

High S&P 500 cap
A blended Index (w/ international and small-cap exposure)
Unique index crediting like monthly sum & trigger method
Ability to be more aggressive with a 40% multiplier (for 1% fee)
Locked 5% loan rate to borrow against any of the Indexed Crediting Strategies

What Concerns Us About Allianz:

Higher interest rates may require Allianz’s caps/pars to stay low since clients can borrow at 5%.
Their nifty “Index Lock” feature is only available with their Volatility Control Indexes, not the S&P 500 or Blended Index.
Will a foreign stock company be more loyal to stockholders or US policyholders in tough times?
Past policyholders don’t have the same caps/pars as new offerings (but not egregiously lower like the worst IUL companies).

Columbus Life – IUL Company with Best Treatment for Inforce Policyholders

Columbus Life Insurance is the IUL arm of the well-rated insurance conglomerate of Western Southern Group, which entered the IUL arms race in the middle of the last decade. As a mutual holding company, neither Columbus Life nor Western Southern answer to the fickle becks and calls of Wall Street stockholders.

Since their only obligation as a company is to the long-term obligation of policyholders, they are more likely to do right by their inforce block of business.

This can be clearly seen in this screenshot we recently sent to one of our clients showing how Columbus Life’s IUL cap rates have steadily increased from 8.75% in December 2022 to 10% exactly one year later as rates ticked up.

What puts Columbus Life on the best IUL companies list is their willingness to nimbly raise caps for not only their latest product offering but also their existing policyholders. Others claim to have the best IUL policy since they start with a higher cap but quickly pull the rug out from under their customers once they shelve that product and start a new one.

It’s worth noting too that when Columbus Life had to aggressively lower their IUL cap rates, they simultaneously lowered their loan rate. This allows IUL policyholders to access their cash value for outside investment opportunities while still having the potential to earn at least some positive arbitrage within Indexed Universal Life.

What We Like About Columbus Life:

Solid S&P 500 cap rate
Participating loan rate is capped at 6% (but has been lower for a while)
Their documented history of treating inforce policyholders fairly
Mutual Holding Company with no outside stockholders

What Concerns Us About Columbus Life:

Their other Indexed crediting strategies are currently unattractive
Highly-rated mutual company, but the smallest on the best IUL list

National Life Group – Best IUL for Chronic Illness Rider

To clarify, all the best IUL companies in this article offer some sort of free chronic illness rider, but National Life Group’s is arguably the most robust. I also want to point out that I am specifically discussing their “Peak Life” product which is their “larger case” product offering a more streamlined fee structure.

National Life Group and their subsidiary Life of the Southwest were really the pioneers of a competitive IUL with free chronic illness riders. Technically the rider is “free”, but we’ve found when stress-testing fees that the mortality expenses are a bit higher than other of the best IUL companies. This is to be expected, and you may have heard me say, “There’s rarely any deals in insurance. Everything gets priced perfectly rather quickly.”

That said, National Life Group is in the running for the best IUL company for clients looking for a balance of performance, income, and comprehensive protection.

Whereas many companies have ambiguous definitions about what can trigger their chronic illness riders, National Life Group clearly delineates it as you can see below. Don’t spend too much time on these details as your numbers will certainly vary, but this shows the type of chronic illness rider payments they offer.

Book a custom call with one of our independent brokers to find out which are currently the best IUL policies with robust Chronic Illness Riders and solid IUL crediting strategies for tax-free income if you don’t become too sick or hurt to function independently.

What We Like About National Life Group:

Diverse S&P 500 crediting strategies (including uncapped)
International Exposure with an Emerging Markets Cap
Locked 5% Participating Loan (against a simple S&P 500 index)
Most comprehensive & delineated chronic/critical illness rider

What Concerns Us About National Life Group:

Mutual holding company, but one of the lower-rated ones in the best IUL company list
Slightly higher mortality structure likely to offset the additional “free” chronic illness benefits

Nationwide – Best IUL Company For Financial Strength

“🎵Nationwide is on your side🎶”. Ok there, I did it. You know you were thinking it too.

But that actually is why Nationwide is one of the top IUL companies. Their size, rating, and overall financial strength are unmatched. Not only that, but they are a true mutual company, meaning they have no outside stockholders nor a holding company to siphon profits to. Their only obligation is to the long-term obligation they have to policyholders.

Nationwide entered the IUL arms race around the middle of the last decade, but came in hot since they were already a major player in the fixed-indexed annuity space. Nationwide is largely responsible for ushering in the Volatility Control Index movement into the IUL space. Although we personally are not huge fans of the VCIs, many clients like having the ability to diversify growth options.

Similar to Allianz, Nationwide has a collection of diverse indexed crediting strategies, both traditional S&P 500 IUL crediting and different Volatility Control Indexes.

Nationwide also gives you the ability to essentially buy additional upside potential with their “High-Cap” or “High-Par” IUL investment strategies which come with an additional 1%-2% fee. Although this lowers an IUL’s floor below 0%, there may be years where you want the additional upside potential.

To learn which IUL’s give you the best upside potential without lowering their 0% floor below -3% book a custom call with one of our independent IUL experts.

What We Like About Nationwide:

Diverse Set of IUL Crediting Strategies
Unique Multi-Index Strategy
History of Treating Inforce Policyholders Fairly
Large Size, Mutuality, and Solid Financial Strength

What Concerns Us About Nationwide:

Strong focus on Volatility Control Indexes
Good long-term growth, but lackluster early cash values
Participating loan option is capped at 8%

Penn Mutual – Best IUL Company for Guarantees + S&P Strategies

It’s not surprising that Penn Mutual ranks the highest of the best IUL companies in terms of guarantees since they also offer the best performing Whole Life policy, known for its guarantees.

Click here to read more about the difference between Whole Life & IUL.

Several of Penn Mutual’s indexed crediting strategies come with a guaranteed 1% floor which means that even in down market years you earn some guaranteed crediting to offset the ongoing cost of insurance. Despite this 1% floor, Penn Mutual still offers competitive caps on its S&P 500 strategies.

Unlike the other best IUL companies on this list, Penn Mutual does NOT offer Volatility Control Index strategies. Given that most of these VCIs have returned 0% to policyholders in the last few years, I kind of get it. In case you missed it above, VCIs are algorithmic market timing strategies managed by well-known financial companies that choose when to put you in the market based on the level of volatility.

What Penn lacks in complex volatilities they make up for with a plethora of S&P 500 strategies such as:

Traditional Cap & Floor S&P 500 Index
High Cap S&P 500 after a 3% Spread
Different Uncapped S&P 500 Options

All of the Indexed Crediting Strategies are created through buying options on the S&P 500. So good on them for getting creative on how to deploy their options budget to create a more powerful result for policyholders.

What We Like About Penn Mutual:

Multiple competitive S&P Index strategies with 0% or 1% floor
Locked 6% loan rate for life
Different uncapped options including a multi-year
2^nd Oldest life insurance company in the US

What Concerns Us About Penn Mutual:

Highly-rated but fastest-growing life insurance
All index crediting strategies tied to the S&P 500

Final Thoughts About the Best IUL Companies

There is so much hype around IUL right now on social media that you must be careful before entering into what should be a lifelong financial contract. Be sure your IUL agent is willing to stress-test their best proposed IUL for you so you make sure it isn’t the best IUL company for them.

All IUL companies can make their IUL illustrations look amazing, so it’s imperative to see how their best IUL policy performs at far less than projected performance.

Indexed Universal Life has so many moving parts at its core, not to mention all the potential bells and whistles different companies add to their policies.

Just remember, that the most important vetting factors for any of these best IUL policies will be:

Available Growth Options
Underlying Fee Structure
Participating Loan Rates
Company Reputation (since much of the above won’t be guaranteed)

Because life insurance regulators have changed the game multiple times in the last decade, companies offering indexed universal life have had to shelve different iterations of their IUL products to stay compliant while remaining competitive. It’s important to denote that these inforce policyholders are being treated fairly since inevitably there will be additional changes and you will join this group.