MW I'm 39, single with no kids - and Instagram is serving me at least 4 ads a day for indexed universal life insurance. Do I need it?
By Aditi Shrikant
'It's advertised as a stock alternative with all the benefits and none of the penalties. What's the catch?'
"It's advertised as a stock alternative with all the benefits and none of the penalties."
Dear Dollar Signs,
I've been seeing at least three to four ads a day on my Instagram for indexed universal life insurance. I assume it's based on my age (39). I am single and don't have kids. It's advertised as a stock alternative, with all the benefits and none of the penalties.
What's the catch? Should we all have these policies?
Skeptical Consumer
If you're just starting out on your money or career journey and have questions about how to navigate your finances, we want to hear from you. Write to Dollar Signs, MarketWatch's new advice column, at dollarsigns@marketwatch.com.
Dear Skeptical,
I would advise against thinking about indexed universal life insurance as a "stock alternative." IULs are a type of life-insurance policy. Let's take a couple steps back and think about what kind of life insurance you'd want, if any.
There are two types of life insurance: permanent and term. Term life insurance provides temporary, lower-cost coverage for a specific period of time. It's typically cheaper than permanent life insurance because it doesn't build up an actual cash value. If the insured person dies during the term, beneficiaries will receive a payout, but if the term expires and the policyholder is still alive, the coverage expires with no payout.
Permanent life insurance, on the other hand, covers an entire lifetime, has higher premiums and builds a cash reserve that can be withdrawn, although withdrawals or loans typically reduce the death benefit paid to the policyholder's heirs.
Indexed universal life insurance is a type of permanent life insurance with returns linked to a stock-market index rather than a direct stock investment. There is a cash-value feature where your account is aligned with an index, usually the S&P 500 . The money is not directly invested in the market in your own account, but you are credited for a certain amount of growth each year, subject to caps, participation rates and policy fees. These caps are usually set at between 8% and 12%, and they vary by policy and market conditions.
Some ads claim you get all the benefits of investing in the stock market and none of the risk because IUL policies typically have a floor of zero, meaning that even if the index goes negative, your policy won't. However, this protection comes with limited upside given that it does not eliminate the risk of either poor long-term performance or the policy lapsing.
"IULs are an option for people seeking flexibility in their financial planning," a representative from the American Council of Life Insurers told MarketWatch via email. (Financial advisers, however, say these policies are really only better for extremely high net worth individuals who have maxed out every other kind of tax-advantaged account and need additional vehicles for tax-advantaged growth.)
Sexy sales pitch
"It's got a pretty sexy sales pitch, but it doesn't work a lot of the ways it's being sold," says Justin Rice, a certified financial planner based in Cliffside Park, N.J.
Indexed universal life insurance is also being sold to a lot of young people who don't have kids and who don't need any type of permanent life insurance, Rice says. Some marketers are even being sued for running misleading ads, according to RP Legal, a law firm based in Columbia, S.C. "The volume of IUL litigation has increased dramatically in recent years," the company said in this statement.
"IUL policies promise returns tied to stock market indices without direct market exposure," it adds. "However, many policyholders report that actual returns fall far short of sales projections. Regulatory agencies have received thousands of complaints about misleading illustrations and hidden fees."
That hasn't stopped Americans from buying the policies: In 2025, IUL sales were up 12% over the previous year, according to the Life Insurance Marketing and Research Association.
There are other ways to build up a cash reserve, Rice says: "If the goal is saving money for the future, a Roth IRA is going to be way more efficient than an IUL."
That said, Rice himself has an IUL policy. "It's a diversification play, not a beat-the-market play," he says. After he maxes out all of his other tax vehicles, like his IRA and 401(k), he puts a portion of his income into an IUL.
IULs, however, are notoriously complex, and you can also diversify through low-cost index funds, bonds, CDs and other assets.
Some advise staying away from IULs altogether. They are "horrid," says Carolyn McClanahan, a physician turned certified financial planner, mainly because of the caps and policy fees. IULs are "sold based on fear," she says. "If you need life insurance, you need to buy a pure life-insurance policy."
There aren't a lot of cases where purchasing an IUL would make more sense than purchasing permanent life insurance. The fact that you don't know what it is, I think, is evidence enough that you probably don't need it.
And seeing as you're young, single and have no kids, I think you can take a pass on this offer for now.
Write to Dollar Signs at dollarsigns@marketwatch.com.
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-Aditi Shrikant
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April 01, 2026 14:19 ET (18:19 GMT)
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