Does an IUL still make sense at 51? A viewer asked me that. An IUL, or indexed universal life policy, earns credits that follow a market index, and a floor keeps a bad year from costing you a loss. In an older video, I'd said we like to see people under 45 when they consider one. I should have explained where that number came from, and my answer on buying an IUL after 50 is where I finally did.
It came from how the insurance companies first taught me to design these policies. They teach agents to design around target premium, which means the premium level that pays the agent full commission. Designed that way, a policy carries heavy costs in its early years. It can take 15 to 25 years of premiums to grow past those costs and ride out the ups and downs of the market. If you start at 55, you may not have that many years.
When I design a policy with the commission cut way down and most of the premium going straight to cash value, the early costs are much smaller. That changes the math after 45, and after 50 too, as long as the funding is high enough.
So the funding level decides it. An IUL charges for its insurance every month, and that cost of insurance rises every year you get older. Someone who starts at 55 or 60 and puts in $500 a month may never outgrow that rising charge. Someone the same age putting in $100,000 a year can outgrow it, because the cash value gets large fast compared with the cost of the insurance. How much should you actually put into a policy? covers sizing.
Your health matters more at this age too. The older you get, the more likely something shows up in underwriting. If you can qualify at standard or better, meaning a middle health rating or a better one, a well-designed IUL can still build real cash value and a solid death benefit.
If you're in your 60s and your main goal is leaving money to your family, whole life is usually the better fit. With whole life, you can put in a set amount and then stop paying, and there's no insurance charge that keeps coming out every month the way it does in an IUL. In an IUL, that rising cost has to be managed later, often by lowering the death benefit. A couple in their 60s asked me exactly this about leaving a legacy, and whole life was my answer. Who shouldn't start one of these policies covers the other situations where I'd tell someone to wait or pick something else.
Illustrations are projections, not promises, and index credits aren't guaranteed. Policy loans also reduce your cash value and death benefit while they're outstanding.
If you're over 50 and considering an IUL, ask for two illustrations at your actual health rating: one at the premium you're comfortable with, and one at the most you could put in. If the cash value in the first one never pulls well ahead of what you've paid in, that premium is too small for an IUL at your age.