How Indexed Universal Life Insurance Works for Business Owners

If you are a business owner, it is important that you protect yourself and your company’s assets. One way to do this is through an insurance policy, specifically an indexed universal life insurance policy.

What is Indexed Universal Life Insurance?

Indexed universal life insurance (IUL) is a type of permanent life insurance that offers both a death benefit and cash value accumulation. With IUL, the policyholder pays a premium, and a portion of that premium goes toward the cost of insurance, while the rest goes toward a cash value account.

The cash value account grows based on the performance of an underlying index, such as the S&P 500. However, the policyholder’s investment is protected from market downturns, as the insurance company places a “floor” on the policy’s potential loss.

Benefits for Business Owners

For business owners, an IUL policy can provide several benefits. First, the policy can serve as a source of cash value accumulation, which can be used for various business needs such as funding a buy-sell agreement or financing business expansion.

Second, the policy can offer an additional retirement savings vehicle for the business owner, as the cash value can be accessed tax-free through policy loans and withdrawals.

Finally, the death benefit can be used to cover the costs of key person insurance, which can help the business survive in the event of the unexpected loss of a key employee.

How it Works

With an IUL policy, the policyholder pays a premium on a regular basis. The insurance company then deducts fees, such as a cost of insurance charge, from the premium and allocates the rest into a cash value account.

The cash value account is tied to an underlying index, and the policyholder’s account is credited with a percentage of the index’s performance, up to a cap rate and subject to a floor rate.

The policyholder can access the policy’s cash value through policy loans and withdrawals. The policyholder also has the option to adjust the death benefit as their needs change.


Indexed universal life insurance can be a valuable tool for business owners looking to protect their assets and plan for the future. If you are interested in learning more about how an IUL policy can benefit you and your business, our team is here to help.

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