The life insurance industry heavily promotes and focuses on the idea of using Indexed Universal Life (IUL), or other cash value life insurance policies, for a supplemental tax-free retirement income stream or even to 'become your own bank.' However, in recognition of Life Insurance Awareness Month, I want to present a concept using Indexed Universal Life for the purpose of life insurance.
This strategy involves the use of a Premium Deposit Account to fund an Indexed Universal Life policy, with an optional future return of premium through a tax-free withdrawal, not a loan. A huge advantage is that in addition to having all premiums essentially reimbursed, the policy still provides a life insurance death benefit for their beneficiaries or supplemental funds for long-term care (LTC) expenses. To demonstrate the efficiency of this strategy, I will first explain the steps and process involved, then provide a client case study to illustrate the scenario and share the projected client benefits.
First, let's establish common ground with our current, post-pandemic, economic environment. During the pandemic, a substantial amount of liquidity was pumped into the system through various stimulus packages. As the economy slowly reopened, the combination of significant liquidity and supply/demand imbalances caused a severe spike in inflation. In response, the Fed-raised interest rates climbed at one of the fastest paces in history to slow the economy and subdue inflation, bringing us to today.
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This information does not substitute for legal guidance and is meant for educational purposes only. Guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. Remember to consider your client's individual circumstances and objectives when discussing their specific situation. LifePro is not a government entity and is not affiliated with the Department of Labor. Please note that the new Fiduciary Rules should be upheld in addition to the current laws and regulations that govern your profession.