Here are powerful ways business owners benefit from an IUL policy
Executive Bonus Plans
Use an IUL to reward and retain key employees with a tax-deductible bonus that funds their own permanent life insurance. It’s a golden handcuff that builds loyalty—and protects your company from unexpected loss.
Key Person Insurance
If your company relies on one or two critical people, losing them could be devastating. A properly structured IUL provides a tax-free death benefit and can be a source of emergency funds if that person becomes ill or passes unexpectedly.
Buy-Sell Agreements
When you have multiple business partners, a death or disability could cripple the company. An IUL can fund a buy-sell agreement, allowing the surviving owners to buy out the deceased’s shares without draining the business.
Tax-Advantaged Retirement Strategy
Business owners often miss out on traditional retirement plans. IUL offers a tax-deferred growth strategy with tax-free withdrawals—providing a reliable supplemental income stream for retirement.
Build Cash Value to Access in the Future
The cash value grows tax-deferred and can be accessed via tax-free policy loans to fund business needs, cover payroll during slow seasons, invest in equipment, or seize new opportunities no bank approval required.
Legacy Planning & Estate Liquidity
Ensure your business passes to your heirs without a tax nightmare. IUL can provide tax-free cash to cover estate taxes, debts, and buyout costs keeping your business in the family instead of forcing a sale.
Asset Protection
In many states, the cash value of life insurance is protected from creditors and lawsuits. That makes IUL a strategic safe haven for your personal and business assets.
Indexed Growth Without Market Risk
With an IUL, your cash value earns interest based on a market index (like the S&P 500), but it’s not directly invested in the market. That means you gain when the market rises, but you're protected when it drops.
Frequently asked questions
How Does an IUL Work for Business Owners?
Who is the “Insured” in a Business IUL Policy?
The insured is the key person whose life is being covered—this could be you (the owner), a business partner, or a top-performing employee. This person must be medically underwritten and approved by the insurer.
In most business cases, the owner takes out the policy on themselves or someone essential to the company.
What Does the Insured Do?
The insured (or the business, on their behalf) pays the premiums. These payments go into the IUL policy, where they do two things:
- Fund the death benefit
- Build cash value linked to a market index like the S&P 500
Who Is the “Insurer”?
They:
- Accept the application
- Underwrite the insured
- Guarantee the death benefit
- Offer index-linked crediting options for growth
Who is the “Beneficiary” in a Business Policy?
The beneficiary is the person or entity that receives the payout when the insured passes away.
In a business IUL:
- It might be the business itself (for Key Person coverage)
- Or partners (in a Buy-Sell Agreement)
- Or a family member (for personal legacy or estate planning)
What Is the “Payout”?
The payout is the tax-free death benefit paid to the beneficiary.
This money can be used to:
- Replace income
- Pay off business debt
- Fund a buyout of shares
- Help the business survive and thrive after a key person is gone
Disclaimer:
Indexed Universal Life (IUL) insurance is not an investment.
It is a life insurance product designed to provide financial protection for your loved ones in the event of your death, while offering the potential for cash value accumulation based on the performance of a market index.
The cash value growth is not directly invested in the stock market, and returns are subject to caps, participation rates, and minimum guarantees as defined by the policy. Any loans or withdrawals taken from the policy may reduce the death benefit and cash value.
IUL is a long-term safety net, not a short-term investment vehicle. Its primary purpose is to help ensure that your family, your business, or your legacy is protected—no matter what life brings.