Indexed Universal Life Insurance (IUL) has become one of the most versatile tools for long-term cash accumulation. It provides permanent protection while allowing policyholders to benefit from index-linked interest credits—without directly participating in the market. When structured and funded correctly, IUL can create meaningful liquidity, tax advantages, and retirement income strategies that complement traditional investment and savings vehicles.
IUL policies credit interest tied to external market indexes (such as the S&P 500®). The policy does not invest directly in the market. Instead, the carrier uses investment strategies to provide interest credits up to a cap, subject to participation rates, and protected by a downside floor, often 0%.
Key terms that drive performance:
This combination creates a risk managed, asymmetric growth profile: limited downside with access to a portion of the upside.
Cash value in an IUL grows tax-deferred. Similar to IRAs and 401(k)s, but without contribution limits or early withdrawal penalties (subject to policy rules).
Many clients use policy loans in retirement to access cash value tax-advantaged, provided the policy stays in force. Participating loan structures may allow continued indexed growth on loaned values.
IUL enables strategic overfunding within IRS limits, accelerating cash value growth while keeping the policy compliant (non-MEC).
The zero-percent floor protects against negative index returns which appeals to individuals seeking safer long-term growth without full market exposure.
Cash value may be accessed tax-advantaged for:
Cash value growth is not tied to a market account’s volatility but to index crediting methods governed by the carrier.
Clients often use IUL as a source of long-term liquidity. Common distribution strategies include:
Withdrawals up to the cost basis are generally tax-free.
Loaned values may remain in index accounts, allowing continued crediting based on policy structure.
Loaned amounts shift to a loan account with a fixed or variable rate.
Important: Poor management of loans or underfunding can cause a policy to lapse. Living Equity Group provides ongoing monitoring and in force review support to mitigate this risk.
Those who want a long-term, flexible supplement to retirement savings often use IUL to diversify from market volatility and tax uncertainty.
Clients with estate planning, business succession, or future liquidity needs value IUL’s combination of protection and accumulation potential.
IUL is frequently used in advanced planning strategies such as Executive Bonus Plans (162 Bonus), SERPs, and Key Person arrangements.
While IUL is powerful, it requires careful design and long-term commitment:
A well-designed IUL is not the same as a minimally funded or poorly structured one. This is where proper case design matters.
At Living Equity Group, we take a multi-carrier, multi-strategy approach to IUL performance modeling:
Our role is to optimize the policy for long-term value. Not just issue coverage.
Considering an IUL for accumulation, liquidity, or legacy planning?
Our team will review your goals and help determine if an IUL structure is appropriate.
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