Higher Potential for Returns One significant advantage of IUL insurance is the possibility of gains in the cash value that may be greater than those on other types of life insurance, such as traditional universal life or whole life insurance policies.
Additionally, policyholders benefit from a crediting floor, which typically ranges from 0% to 1%. This means that the current cash value is protected from losses in a market with poor performance.
3 Niefeld stated, “The client does not participate in a negative crediting rate if the index generates a negative return.” To put it another way, the account won’t lose any of its initial cash value.
Advantages in Taxation for Capital Gains The death benefit is exempt from taxation for beneficiaries, and the cash value accrues tax-deferred. In many instances, loans secured by the policy are also tax-free. Since premiums are paid with money left over from taxes, both partial and complete withdrawals—up to the amount paid in premiums—are exempt from taxes.
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