If you’re looking for a smart, tax-advantaged way to grow and protect your wealth, an Indexed Universal Life Insurance (IUL) policy could be the solution you’ve been searching for. An IUL is a type of permanent life insurance which offers both a death benefit and a powerful cash value component that grows over time—making it an exciting strategy among savvy individuals, families, and business owners who prioritize long-term savings, tax-free income, and financial security. This type of policy takes advantage tax code 7702 which allows the cash value to grow tax-free.
What Is an IUL?
An Indexed Universal Life Insurance (IUL) policy combines the lifelong protection of permanent life insurance with the ability to grow cash value based on the performance of a market index—such as the S&P 500. But unlike direct stock investments, your IUL cash value isn’t subject to market losses. That’s because of the popular “zero is your hero” feature—if the market goes down, your policy doesn’t lose value due to that drop. This makes an IUL a powerful tool for building long-term, stable savings without the same volatility as traditional investments. It is important to note however, that IULS are not free savings accounts.
Living Benefits: Protection While You’re Alive
One of the most compelling features offered by some insurance companies is living benefits. These allow you to access a portion of your death benefit if you experience a qualifying illness or chronic condition during your lifetime. That means your IUL doesn’t just protect your loved ones—it can help protect you when you need it most.
The Key to Success: Policy Structure
Like any financial tool, the effectiveness of an IUL comes down to how it’s structured. While some critics point to underperforming IULs as evidence against them, the truth is, poor performance is often the result of poorly designed policies.
At Brightside Financial, we help our clients design max-funded, well-structured IULs that are built for performance and resilience—even in tough market conditions. Our goal is to set your policy up to accept the most cash without becoming a MEC (Modified Endowment Contract). This allows you to take full advantage of the IRS 7702 tax code, where excess premium dollars go toward growing your tax-deferred cash value.
Tax-Free Growth & Retirement Income
The beauty of a properly structured IUL lies in its ability to build tax-free cash value over time. When designed correctly, you can access that money in retirement via policy loans—without triggering taxable events. This strategy has gained popularity among high-net-worth individuals and those looking to diversify beyond their 401(k) or IRA.
Long-Term Strategy, Not a Get-Rich-Quick Scheme
An IUL is not a short-term investment or a get-rich-quick strategy. It’s best suited for long-term financial goals like retirement, college funding, or legacy planning. One of the most exciting ways families are using IULs today is through a strategy called the “Million Dollar Baby”—where parents take out an IUL for their newborn. With decades of tax-free compounding ahead, the results by retirement age can be truly life-changing.
Why Now Is the Best Time to Start
The earlier you begin funding an IUL, the greater the potential for growth. Younger individuals enjoy lower insurance costs, which means more of your premium goes toward building cash value. Whether you’re a parent, professional, or entrepreneur, now is the best time to explore how an IUL can benefit your financial future.
Learn More
Want to see the math and studies behind IULs? Explore some in-depth research and comparisons:
- NAIFA: Permanent Life Insurance for Tax-Free Income
- ThinkAdvisor: IULs in Retirement Planning
- Forbes: How Indexed Universal Life Insurance Works
At Brightside Financial, we specialize in helping individuals, families, and business owners build tax-efficient strategies using life insurance solutions like IULs. If you’d like to explore how this strategy could work for your specific goals, schedule a free consultation with us today.
Check out this article for more information about Life Insurance with Living benefits.
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