Indexed Universal Life (IUL) links cash value growth to stock market indices like the S&P 500, with a 0% floor (no losses) and a 10-12% cap on gains. While this sounds attractive, complex crediting formulas often reduce actual returns. Participation rates, spread fees, and monthly charges eat into gains [^44^][^53^].
Variable Universal Life (VUL) puts cash value into investment subaccounts resembling mutual funds. You choose stock, bond, or money market funds. Returns are not guaranteed, and poor performance can cause the policy to lapse if cash value drops below premium costs. VUL requires active management and carries the highest fees of any permanent product.