What if your life insurance policy wasn’t just protection but also your secret weapon for financial flexibility?
Of course, life insurance is a wonderful support to provide for your loved ones when you’re gone. But it doesn’t have to just be that. Indexed universal life insurance is a dual-purpose tool. It can build up a cash value that you can borrow against.
An IUL insurance policy isn’t just insurance; it’s your personal bank that doesn’t ask nosy questions. You can borrow money when you need it, set your own repayment terms, and watch your cash value have the opportunity to keep compounding in the background.
But just like a good financial tool, using it wisely is key—treat it like a trusty sidekick. Let’s jump into how borrowing from an IUL can help you become your own banker.
IUL: Why Should You Care?
IUL is simply the best of both worlds—it’s the life insurance you need with the cash value and growth potential components you want.
How does an IUL work? Well, an IUL policy is tied to a stock index, so the cash value can grow—or shrink—over time. But never fear; policy safety is here to save the day. Your IUL is protected with a 0% floor so you don’t lose anything due to market volatility when the market crashes.
Your IUL isn’t just a safety net; it can actually be a trampoline for your finances. That’s because it offers the relief and protection you want to leave for your loved ones, plus a tax-advantaged way to build wealth. It’s like a savings account that doesn’t guilt you for dipping into it.
Why Borrow from an IUL Instead of a Bank?
Borrowing from an IUL saves you from those nerve-wracking credit checks and lengthy approval processes that banks put you through. And you don’t have to explain your reason to anyone. It’s all your prerogative.
When you borrow money from an IUL policy, you also get to set your repayment terms—or skip them entirely. What’s more? The money you borrow doesn’t stop having the opportunity to grow within your policy. We know—it sounds pretty great.
Just imagine—it could be like borrowing from a bank that never scolds you for missing a payment.
How to Borrow from Your IUL
Borrowing from your IUL isn’t nearly as hard as you may have guessed. In fact, here are just a few simple steps you can take to get started today:
- Check your cash value. Log into your policy or contact your provider to see how much you can borrow.
- Request the loan. Fill out a quick form or make a call—no lengthy paperwork is required.
- Understand the loan structure. Are you choosing a Zero Wash (also called a Zero Cost Loan, where the interest charged is the same as the guaranteed interest you’ll earn on your borrowed funds) or an Index Loan (where you’re paying higher interest on the borrowed funds than a Zero Wash Loan, with the opportunity to earn even more interest than they’re charging—but if the market drops you’ll earn 0%)?
- Receive your money. Typically, it’s as simple as transferring funds right to your account.
Here’s the truth: if you can shop online, you can borrow from your IUL—it’s that user-friendly. But if you need some help, don’t hesitate to reach out to your policy provider or a trusted financial aid for a friendly nudge in the right direction.
Perks of Being Your Own Banker
Your money could just keep growing. Borrowing from your IUL doesn’t hit pause on that cash value. It can keep compounding even while you’re using it. And as long as you follow IRS guidelines, you can enjoy access to tax-free income without the government calling for their cut. It’s a rare win in the tax world.
Unlike those traditional banks, if you can be your own bank with an IUL, you can skip the strict deadlines and harsh penalties. It’s not like the bank that emails you daily reminders. You can pay it back on your timeline or not at all. (If you decide not to repay the loan, it’s just deducted from the death benefit upon your passing.)
With an IUL, you’re the banker calling the shots. No uncomfortable loan interviews are necessary. It’s your money and your rules.
When Could Borrowing From an IUL Help You?
Look, you may be assuring yourself now that you’ll never need to borrow from your IUL, but trust us—life happens. Down the road, you may find yourself wondering how to do it. Here are some common situations in which someone might want to borrow from their IUL:
- A family is using an IUL loan to fund a child’s college education to avoid the child acquiring student debt.
- An entrepreneur is kickstarting a small business with an IUL loan instead of a traditional bank loan.
- A couple wants to use an IUL loan for rental property upgrades without dipping into their savings.
So whether it’s paying for a new roof or a new ride, your IUL has your back for whatever life brings you.
In the End
Now, it’s true—there are some potential pitfalls to borrowing from an IUL. As we mentioned, loans that are never repaid can reduce the death benefit received by your loved ones. Interest accrues on the money borrowed, which can eat into your policy value over time. This isn’t Monopoly money, after all.
The good news? Just a bit of planning keeps the risks low and the rewards high.
Your IUL isn’t just insurance—it might just be your financial best friend, always there when you need a boost. But with indexed universal life insurance, you’re not just borrowing; you’re building on your finances.
If you’re ready for more information or want to get started, talk to a trusted financial professional about unlocking your policy’s potential. Because why settle for a regular bank when you could be your own?