When you think about life insurance, you probably picture a payout that only kicks in after you’re gone. But what if your life insurance could work for you while you’re still here, helping you handle emergencies, pursue in your goals, and enjoy greater financial freedom? That’s precisely what you unlock when you choose an Indexed Universal Life (IUL) policy with living benefits.

An IUL policy is not your typical life insurance. It offers permanent coverage and grows cash value based on a stock market index, often the S&P 500. But what makes it truly stand out is how it allows you to access that cash value while you’re still alive.

These living benefits can become an incredibly useful financial tool, whether you’re planning for retirement, managing medical expenses, or funding a big purchase. Let’s explore exactly how these features can benefit you now, not just later.

5 Living Benefits You Can Use Today

1. Accessing Cash Value While You’re Alive

One of the key benefits of an IUL policy is the potential to build cash value over time. As you make premium payments, part of that money goes into a cash value account. This account can grow based on the performance of a market index, like the S&P 500, but without being directly invested in the market. IUL policies include a 0% floor that protects your account from losing value due to market volatility when the index goes down, which can offer some peace of mind.

As the cash value grows, you may be able to access it through loans or withdrawals. It’s typically recommended to use loans rather than withdrawals, with the cash value in your policy acting as collateral for the loan. This is often compared to borrowing from yourself. There’s usually no credit check or lengthy approval process. You can use the funds however you choose, whether to pay off debt, cover unexpected expenses, invest in a side project, or simply enjoy a vacation.

For example, if you’ve built $100,000 in cash value over several years, you might choose to borrow $20,000 to cover a home remodel. That money is typically tax-free, and if structured properly, your cash value keeps earning interest as if you hadn’t borrowed it. That’s a feature banks just can’t compete with.

2. Creating a Tax-Free Retirement Income Stream

As you approach retirement, having multiple sources of income becomes increasingly important. You might already have Social Security, a 401(k), or an IRA. But those accounts come with taxes, and tax rates in retirement can be unpredictable. Using IUL for retirement is where your policy shines.

By borrowing against your IUL’s cash value, you can create tax-free income during retirement. Since loans aren’t considered taxable income, you can access your money without increasing your tax liability. That means you can better control your tax bracket and reduce your reliance on taxable income sources.

This can be especially useful if you want to delay tapping into Social Security, and with IUL there are no required minimum distributions (RMDs) like you get with traditional retirement accounts. You get more flexibility and greater peace of mind knowing you have a bucket of tax-free funds available when you need them most.

Think of it as your “retirement buffer.” During years when the market dips or when pulling from your 401(k) would bump you into a higher tax bracket, you can lean on your IUL. Then, when conditions improve, you can return to your other accounts, continue to rely on your IUL, or utilize a combination of them.

3. Supplementing Income During Major Life Events

Life doesn’t always follow a perfect script. Whether it’s an unexpected job loss, a medical expense, or the opportunity to invest in something meaningful, you’ll want access to funds that don’t require heavy penalties or complicated withdrawal processes. This is where your IUL policy’s flexibility becomes invaluable.

For instance, let’s say your child has a once-in-a-lifetime opportunity to study abroad, and you want to support them without dipping into your IRAs for 401(k)s.. You instantly have money for education, without having to pull from your accounts that could incur a 10% penalty (if before age 59 ½) and taxes on the withdrawal.

Or maybe you’ve always dreamed of starting a side business, but you’re short on money. You can take out an IUL loan for business working capital—no bank loans required, no mountains of paperwork, and no explaining your “why” to anyone.

The living benefits of your IUL empower you to respond to life’s curveballs or seize opportunities that may not come around twice. It gives you options that most financial products can’t promise.

4. Covering Medical or Long-Term Care Costs

Many IUL policies also include riders that enhance their living benefits, especially regarding your health. One such rider is the chronic illness or critical illness rider, which allows you to accelerate a portion of your death benefit if you’re diagnosed with a qualifying condition.

Let’s say you’re diagnosed with a chronic condition that limits your ability to perform daily tasks like bathing, dressing, or feeding yourself. Instead of waiting for your death benefit to help your loved ones, you can use it to help yourself right now. You can cover caregiving costs, medical bills, or even household expenses while you recover or adapt your lifestyle.

This kind of access helps you preserve your dignity and your financial independence. You won’t have to rely solely on family or deplete your savings during a tough time. Instead, your policy works as a built-in safety net.

5. Providing Peace of Mind While You’re Living

Even if you never borrow from your policy or trigger a rider, there’s still significant peace of mind that comes with having an IUL. You know your premiums are doing more than just funding a death benefit. You’re building a financial foundation that’s liquid, flexible, and tax-advantaged.

It’s the kind of reassurance that goes beyond spreadsheets and balance sheets. Whether you use the funds or simply enjoy knowing they’re available, you have a plan that adapts to your life, not just after it.

This proactive approach to financial planning gives you confidence. You’re not just buying life insurance; you’re building a living financial tool that supports you during life’s seasons.

How to Make the Most of These Living Benefits

To maximize your IUL policy’s living benefits, setting it up correctly from the start is essential. That means working with a knowledgeable IUL expert who can help you structure your policy for cash value growth, choose the right index strategies for you, and understand your loan options.

As time goes on, you should regularly review your policy with your IUL professional to ensure it still aligns with your goals. Life changes, and your strategy should change with it. By staying proactive, you’ll avoid common mistakes like overborrowing, ignoring fees, or missing opportunities to grow your policy’s value.

If you treat your IUL as a living, breathing part of your financial life, not a “set it and forget it” insurance policy, you’ll open up a world of options. It’s not just about leaving a legacy; it’s about living more fully today.

Your IUL policy isn’t just about protecting your loved ones after you’re gone. It’s about enhancing the quality of your life now. From tax-free retirement income and emergency funding to medical protection and peace of mind, the living benefits of an IUL are designed to work for you every step of the way.

When structured and managed properly, your IUL can be more than insurance. It can be a powerful financial ally. So, whether you are planning for retirement, navigating life’s surprises, or investing in your dreams, your policy can give you the support and flexibility you need.