Term Life vs IUL 2027 Comparison Calculator
Compare term life insurance vs Indexed Universal Life (IUL) 2027 — see cost difference, cash value buildup, when IUL beats buy-term-invest-difference.
Term Life Mechanics
Pay annual premium for fixed term (10/20/30 years). If you die during term → beneficiaries get death benefit. If you outlive term → no payout, premiums gone. Cheap for cost ($200-800/yr typical age 30-50).
IUL Mechanics
Permanent life insurance with cash value tied to S&P 500 (capped 8-12% upside, 0% floor). Premiums 5-15x higher than term but cash value grows tax-deferred and can be borrowed. Complex fees.
Buy-Term-Invest-Difference Strategy
Buy cheap term life. Take the premium savings (vs IUL) and invest in low-cost index funds in Roth IRA / 401k. Usually beats IUL because of fees, caps, and surrender charges in IUL.
When IUL Makes Sense
High earners ($300k+/yr) who maxed 401k/Roth/HSA need additional tax-deferred vehicle. Estate planning with permanent need for death benefit. Business owners with split-dollar arrangements.
Source: naic.org IUL Suitability Guidance 2026, iii.org consumer guides. Last updated: May 2026.
Frequently Asked Questions
Does IUL beat the S&P 500?
Almost never net of fees. IUL caps gains at 8-12%, charges 1-3%/yr in fees, has surrender penalties first 10-15 years. S&P historic ~10% beats this consistently.
Can I convert term to permanent?
Most term policies have a conversion rider — convert to whole/IUL without new underwriting. Useful if your health declines but you still need permanent coverage. Time limit usually 60-70.
Who shouldn't buy IUL?
Anyone not yet maxing 401k + IRA. Anyone with debt. Anyone who might let policy lapse (high surrender charges). Anyone without strong tax planning need.