Surging S&P 500 Boosts Index Universal Life Insurance (IUL) returns 2023

The journey of the S&P 500 in 2023 was a narrative of resilience and recovery, starting from a base of 3960 on January 1st and culminating at an impressive 4769 by December 29. This remarkable growth of 24.2% was influenced by various factors, including economic shifts, political developments, and technological advancements.

Key Milestones of the S&P 500's 2023 Journey

• The S&P 500 index saw a significant rise to 4136 by early February, buoyed by global political and geopolitical events.

• A temporary downturn occurred in March, with the index dropping to 3861 but then recovering to 3951 by March 20.

• A consistent ascent was observed in June, reaching 4409 by June 18, and further climbing to 4588 by the end of July.

• Despite fluctuations in the subsequent months, the index rebounded from 4274 in late September to 4567 by the end of November.

• December witnessed a surge in the S&P 500 index to close out the year near record highs, driven by easing inflation and the anticipation of lower US interest rates, concluding the year with a strong performance.

The Impressive Impact on Index Universal Life (IUL) Policies

For IUL policyholders, the significant gains of the S&P 500 in 2023 meant a notable increase in their policy cash value. This growth marked a welcome change from the zero-return experienced in 2022 and highlighted the advantages of linking life insurance policies to market performance.

A reminder on how IUL policies work….

Understanding IUL Returns

Firstly, the cash value in an IUL policy is not directly invested into shares that make up the S&P 500. Instead, the policy value is linked to the performance of the market index. This means the returns on the cash value portion of the policy are contingent on the index's performance.

Capped Gains

However, IUL policies have a cap on the maximum return credited to the policy, limiting the S&P 500 gains during exceptionally good market years like those we have seen in 2023. So, whilst policyholders benefit from the positive market performance, their gains would be limited to the cap rate specified in their IUL policies, which is typically 10% to 12% per year.

But consider this, despite a return of 24.2% this year, the S&P 500 has still not erased the losses of 2022. Our in-house analysis shows that an IUL with a cap would have performed better over the last 2 years because of the no stock market losses guarantee.

Zero Losses

A key feature that differentiates IUL from direct market investment is the protection against market losses.

Policy holders are guaranteed to never lose money from stock market losses for the rest of their life.

It’s a guarantee that hardly any other financial institution outside a financially strong life insurer can make.

In addition to this, most IUL policies also include a guaranteed minimum crediting rate, ensuring that even in consistent declining market conditions, your cash value is protected from the full extent of the market downturn. However, this minimum guaranteed return only applies to policy’s where investors cash out.

Together, these safeguards against market losses, make investing in an IUL an appealing choice for high-net-worth client’s seeking a combination of life insurance protection and retirement planning growth linked to the S&P 500 index.


The S&P 500's performance in 2023 illustrates the potential benefits of linking the returns of an IUL policy to this popular index. The strong recovery and growth of the index in 2023 has positively impacted the cash value of IUL policies tied to it, up to the policy's predefined capped limits.

This underscores the importance of understanding the specific terms of an IUL policy, including the cap and floor rates, to accurately gauge the potential for growth and the level of protection against market downturns. As with any financial product, it's advisable for individuals to consult with a life insurance agent or financial advisor to understand the suitability of an IUL policy for their specific financial goals and circumstances.

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S&P 500 Performance in 2023 Boosts <strong>Index Universal Life Insurance</strong> Policies