Tax-Free Policy Loans for Business Needs
Business owners can borrow against the cash value of their IUL policy tax-free, as long as the policy stays in force.
These loans can be used for:
Funding expansion
Bridging cash flow gaps
Investing in new equipment
Covering payroll during slow periods
Tax-Deferred Growth of Cash Value
The cash value inside an IUL grows tax-deferred, meaning you won’t pay taxes on the gains while they’re accumulating.
This is particularly useful if you're using the IUL as a supplemental retirement fund or emergency reserve for your business.
Executive Bonus Plans (IRC §162)
IULs can be used as part of an executive bonus plan to reward and retain key employees.
The business pays the premiums and writes them off as a tax-deductible expense.
The employee owns the policy and can benefit from tax-advantaged growth and eventual tax-free income through policy loans.
Key Person Insurance
An IUL can serve as key person insurance, helping your business recover financially if a crucial employee or owner passes away.
The death benefit is generally tax-free and can be used to:
Hire and train a replacement
Pay off debts
Reassure creditors and investors
Business Continuation & Buy-Sell Funding
An IUL policy can fund buy-sell agreements between partners.
Upon the death of an owner, the policy's tax-free death benefit can be used by the surviving owners to buy the deceased owner’s share of the business without triggering major tax consequences.
Supplemental Retirement Planning
For business owners who max out other retirement vehicles (like IRAs or 401(k)s), an IUL provides a way to grow wealth with no contribution limits and tax-free withdrawals (if structured properly).
This can help diversify retirement income streams and hedge against higher future tax rates.
Estate Planning and Legacy Creation
IULs can also help business owners transfer wealth to their heirs or business successors in a tax-efficient manner.
The death benefit is generally income-tax free, and with proper planning, can also help cover estate taxes or equalize inheritances.
