Last updated: 2026-01-17
Information is for general guidance only and does not constitute financial, tax, or legal advice. Regulation and tax treatment vary by jurisdiction and individual circumstances.
What is IUL?
Indexed Universal Life (IUL) Insurance is a flexible form of permanent life insurance. It combines lifelong coverage
with the ability to accumulate cash value based on the performance of a market index, such as the S&P 500.
Your IUL's cash value can be credited with interest when the selected index performs well, while many strategies use a floor mechanism that reduces direct downside from negative index periods (charges still apply).
Key takeaways
- IUL is insurance first; cash value outcomes depend on crediting rules, caps/spreads/participation, and charges.
- Funding discipline matters more than “picking the perfect product”. Poor funding can undermine long-term performance.
- Policy loans/withdrawals can reduce coverage and change outcomes if not managed properly.
- Suitability depends on goals, residency and tax exposure, time horizon, and insurer quality.
“IUL insurance lets you benefit from potential index growth, offers flexible premiums, and features a minimum credited rate approach for downside protection (subject to policy terms and charges).”
Key Benefits for High Net Worth Families in the UAE
- Wealth Preservation & Legacy Planning: IUL can be used to support long-term wealth transfer planning, providing a death benefit designed to create liquidity and help protect family objectives.
- Cash Value Growth Design: Cash value may be credited based on index-linked strategies. Results depend on caps/spreads/participation rates, policy charges, and funding levels.
- Customisable Protection: Premium flexibility and rider options can be tailored (availability varies by provider and jurisdiction).
- Downside Protection & Upside Potential: Many strategies use a floor approach against negative index periods, while still limiting upside via caps/spreads/participation.
- Access to Liquidity: Policy loans/withdrawals may provide access to cash value, but they can reduce the death benefit and affect performance if unmanaged.
- Privacy and Structuring: In appropriate structures, life insurance can support planning privacy and orderly transfer objectives (jurisdiction-dependent).
- Estate Equalisation: Death benefit planning can help equalise outcomes among heirs or fund estate settlement needs across complex family structures.
Real Life Examples of IUL in Action
- Covering a UK Inheritance Tax (IHT) Liability: A UAE-resident, UK-connected executive anticipates an IHT exposure. A life policy held under an appropriate structure is designed to provide liquidity so heirs are not forced into distressed sales. Structure and tax outcomes depend on personal circumstances and advice.
- Business Succession: A Dubai business owner uses life cover planning for buy-sell funding. If a partner dies, the policy payout provides liquidity for a buyout, helping business continuity.
- Education and Opportunity Funding: A family builds policy cash value and later uses carefully managed access to support tuition funding, aiming to avoid selling long-term assets at a poor time.
- International Legacy Planning: An expatriate with heirs across multiple jurisdictions uses insurance planning to simplify liquidity and equalisation objectives in their estate plan.
Is IUL Right for Your Family?
IUL is not “one-size-fits-all”. It may be appropriate where you need permanent cover, long-term planning flexibility, and structured estate liquidity.
The trade-offs are real: charges, crediting limits, insurer strength, and the requirement for consistent funding all matter.
If you’re internationally mobile, the key question is how the policy fits with your residency, tax exposure, and estate objectives across jurisdictions.
Common questions
Is Indexed Universal Life (IUL) an investment?
IUL is a permanent life insurance policy with cash value. The cash value may be credited using an index formula, but you do not own the underlying index or shares.
How does IUL downside protection work?
Many IUL strategies use a floor (often 0% before charges). Negative index periods typically do not directly reduce credited interest for that period, but policy charges still apply.
Who typically considers IUL in the UAE?
It’s commonly reviewed by internationally mobile families and high net worth individuals who want permanent cover and structured, long-term planning for wealth transfer and estate liquidity (subject to suitability and jurisdiction).
What are the key risks to understand with IUL?
Key considerations include policy charges, cap/spread/participation limits, insurer strength, funding discipline, and how loans/withdrawals can affect performance and coverage.
About the author
This page was written and maintained by Patrick Macdonald ACSI, an international financial adviser specialising in cross-border wealth management and financial planning for expatriates living in Dubai, the UAE, and the wider GCC.
Patrick’s work focuses on long-term investment planning, retirement strategy, and international estate planning considerations for globally mobile individuals, particularly where UK, US, and multi-jurisdictional rules can affect outcomes.
Read more about Patrick Macdonald ACSI
