10 reasons to love IUL

This is where IUL really shines. Since indexed products do not lose value as a result of market downturns, it can provide an enormous cushion against volatility. The 38 percent market drop in 2008 represented an enormous buying opportunity. If all your money were in stocks you would not be able to take advantage of that buying opportunity. Since most of my money was in indexed products in 2008, I had the dry powder to capitalize on the market conditions and posted a significant gain for the year. My retired clients were able to use their IUL policies to supplement their income rather than being forced to sell their securities in a down market. 

Protection Against Tax Rate Changes: 

Every few years we experience major changes in our tax laws. Since life insurance values can be accessed income-tax free, it becomes an ideal income vehicle for high tax years. It can also be used as a supplemental income vehicle to prevent one from creeping into higher marginal brackets.

Access to Credit: 

Policy loans commonly have fixed interest rates between 5 percent and 6 percent. In today’s interest rate environment, that may not seem low. But remember the 80s when mortgage rates were in the mid-teens? An IUL policy with a low fixed interest rate will most likely be the most advantageous line of credit available. There are no restrictions on the use of loan proceeds, no need to qualify and repayment terms are vastly more flexible than bank loans. And, if the loan is participating, your policy values will not be affected once the principal and interest is repaid. 

Student Loan/Financial Aid Eligibility: 

Life insurance cash values need not be disclosed on FAFSA forms. This can greatly enhance a student’s ability to get favorable student loans and financial aid. And with IUL’s protection against market downturns, it is an ideal vehicle to store money earmarked for college especially as the student nears college age. 

Social Security Protection: 

When one spouse dies the other will experience a drop in Social Security benefits anywhere from 33 percent to 50 percent. The tax-free death benefit of a life insurance policy can replace the lost Social Security benefit and tax-free distributions from the policy while the insured is alive and can be used to reduce the amount of Social Security benefit that is subject to income tax. 

Creditor Protection: 

Accidents happen and nobody is exempt from lawsuits. Most states provide generous exemptions on life insurance cash values from the claims of creditors. 

While IUL may not be the very best vehicle in each of the above categories, it does a respectable job in all of them. Even if you believe that cash value in a life insurance policy is an inferior investment, can you name any other product that achieves all the above results?