November 2026 - CPS Special Risk Services

How Business Owners Use Indexed Universal Life

November 10, 2026 by Tim Fuller

Business owners use indexed universal life (IUL) for three main jobs: rewarding and keeping key employees through executive bonus plans, protecting the business if a key person dies, and funding buy-sell agreements. The cash value can also become supplemental retirement money for the owner or the employee later.

Key takeaways

Executive bonus (Section 162): the business pays the premium as a bonus, generally deductible as compensation, and the employee owns the policy.
Key person: the business owns the policy and receives the death benefit; premiums are not deductible.
Buy-sell: life insurance funds the purchase of an owner’s share at death, and cash value can help with a lifetime buyout.
Employer-owned policies need notice and written consent before they are issued.

Executive bonus plans (Section 162)

The business pays the premium on a policy owned by the employee and reports it as a bonus. The bonus is generally deductible to the business as reasonable compensation and taxable income to the employee; some plans add a bonus to cover that tax. The employee gets a death benefit for their family and cash value they can use later.

A restricted executive bonus adds a vesting schedule or other restrictions, so the employee has a reason to stay. It is a simple way to create “golden handcuffs” without a qualified plan.

Key person protection

If a top salesperson, engineer or co-owner dies, the business can lose revenue, credit and time. With key person coverage, the business owns the policy, pays the premium and receives the death benefit to recruit a replacement, reassure lenders and keep operating. Premiums are not deductible, and the cash value is a business asset.

Employer-owned life insurance must meet the notice and consent rules in IRC section 101(j) before the policy is issued, or part of the death benefit can become taxable. Your advisor and CPA should confirm the paperwork is in place.

For many business owners, the business is the biggest asset. Life insurance is often what makes the succession plan actually work.

Funding buy-sell agreements

A buy-sell agreement sets who buys an owner’s share, and at what price, if the owner dies, becomes disabled or leaves. Life insurance provides the money at death. In a cross-purchase plan the owners insure each other; in an entity purchase plan the business insures each owner. Cash value in an IUL can also help fund a buyout at retirement.

Retirement money for the owner

Owners who have maxed out their qualified plan sometimes use IUL as supplemental retirement savings, taking tax-free policy loans in retirement when the policy is designed and kept in force correctly. It pairs well with a business that has uneven cash flow, since IUL premiums can be flexible within limits.

See SRS business planning for key person, buy-sell, executive compensation and succession resources.

Frequently asked questions

Are life insurance premiums tax-deductible for a business?

Executive bonus premiums are generally deductible as compensation. Premiums on policies the business owns and benefits from, such as key person coverage, are not deductible.

What is a restricted executive bonus arrangement?

An executive bonus plan with a vesting schedule or other restrictions on the policy, used to encourage a key employee to stay.

Cross-purchase or entity purchase?

It depends on the number of owners, the business structure and tax goals. Work through it with your CPA and attorney.

Do employees have to consent to employer-owned life insurance?

Yes. Under IRC section 101(j), the employee must receive notice and give written consent before the policy is issued.

Financial professionals: download our free one-pager, Why Clients Buy Accumulation IUL, or request an illustration. Individuals: see who buys cash value life insurance, and who it’s not for, or ask Tim a question below.

General information, not tax, legal or investment advice. Tax treatment depends on proper policy design, keeping the policy in force and current law. Policy features, riders and availability vary by carrier and state. Illustrations are not guarantees.

50+ Years in Business60+ Top-Rated Carriers★★★★★ Rated by Advisors

Reviewed by Tim Fuller on 2026-09-30

Tim Fuller

President, SRS Inc.

Tim leads SRS Inc., a full-service IMO (Independent Marketing Organization) and BGA (Brokerage General Agency), connecting independent financial professionals with life, annuity, disability income, and long-term care solutions from 60+ carrier partners.

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How to Start the Long-Term Care Conversation With Clients Who Avoid It

November 4, 2026 by Tim Fuller

Start the Conversation: proactive long-term care planning training from CPS Special Risk Services

The best way to start a long-term care conversation is to skip the product and ask one question: “What’s your plan for extended care?” Then listen. Most clients will never raise long-term care on their own, so advisors who bring it up early, patiently and with the focus on family rather than dollars help far more people plan while they can still qualify.

Key takeaways

Only a small share of Americans own long-term care coverage, and most clients are simply never asked.
Open with “What’s your plan for extended care?” and let the client lead.
Talk about the people at risk (spouse, kids) before costs or odds.
Solve for care at home first. Even partial coverage reduces the draw on retirement savings.
Expect a series of conversations, not a one-call close.

Watch the full training: Start the Conversation, Proactive Long-Term Care Planning (for financial professionals).

Why advisors need to raise long-term care first

Industry estimates suggest only about 1 in 10 Americans over 40 own any long-term care coverage, and that share has changed little in two decades. Meanwhile, the U.S. Department of Health and Human Services projects that 56% of Americans turning 65 will develop a serious long-term care need (ASPE, 2022).

The people who call an advisor on their own tend to fall into two groups: former caregivers who have lived through it, and people whose health has already changed. The first group is motivated but small. The second group often can’t qualify. Everyone else, the healthy and insurable clients in your book, is waiting for you to bring it up.

Ask one question: “What’s your plan for extended care?”

Notice what this question leaves out: insurance, premiums and products. It asks about the client’s plan. Every client already has one. By default, it’s paying out of pocket and relying on family. They just haven’t looked at how it would work.

When a client answers with “What do you mean by extended care?”, they’ve opened the door to a conversation. Have simple definitions ready: what care is, where it usually happens and when it starts. Most care is delivered at home, not in a nursing home, and most people want to stay home as long as possible.

A long-term care policy isn’t the plan. It’s what pays for the plan. The plan itself protects the people around the person who needs care: their spouse, their children, and the income the healthy spouse depends on.

Lead with family, not dollars or odds

Leading with the cost of care or the odds of needing it usually starts a debate. A more useful question is “If you needed care, who would really pay the price?” Four follow-up questions help a client build their own plan:

Where would you want to receive care?
Who would take care of you day to day?
What would that mean for the people providing care?
How will you protect them from those costs?

For clients with children, ask what role the kids would play. Most say they don’t want their children taking care of them. The gentle follow-up: without a plan, what choice will the kids have?

Handle “It won’t happen to me” with longevity

Rather than arguing statistics, connect to something clients already believe. Their retirement projections likely run to age 90 or beyond. Ask, “If you live to 85 or 90, isn’t it reasonable you could need some care along the way?” Most people agree. From there you’re planning for a consequence, not debating a risk.

Solve for home care first

For couples, long-term care is a first-to-need-care problem: the cost of care lands on top of normal living expenses while both spouses are still living. Part-time help, eight hours a day, five days a week, at about $35 an hour comes to roughly $6,000 a month. Local rates vary, so check the CareScout Cost of Care Survey for your area.

Coverage doesn’t have to be all or nothing. In a simple illustration, a $5,000 monthly benefit against $10,000 of monthly care cuts the draw on savings in half, which helps protect income for the healthy spouse. See our long-term care planning page for the solutions SRS works with, including traditional, hybrid life/LTC, annuity-based and short-term care.

Download the one-page advisor guide. Keep the opening question, the four plan-building questions and responses to common pushback handy for your next review. Get the free PDF →

Long-term care conversation questions

How do I bring up long-term care with a client who doesn’t want to talk about it?

Ask “What’s your plan for extended care?” and listen. If they aren’t ready, offer something to review at home with their spouse and bring it up again at the next review. It’s often a series of conversations.

What should I say when a client wants to self-insure?

Point out that paying out of pocket is already their default plan, then run the numbers together: projected care costs, the effect on retirement income, and the role family members would play.

Should I use statistics to show clients the risk?

Use them sparingly. Statistics tend to start debates with clients who haven’t been caregivers. Connecting care needs to the long life their retirement plan already assumes is usually more persuasive.

Does a long-term care policy need to cover the full cost of care?

No. A partial benefit can still meaningfully reduce the monthly draw on savings and help protect income for a surviving spouse.

50+ Years in Business60+ Top-Rated Carriers★★★★★ Rated by Advisors

Reviewed by Tim Fuller on 2026-11-04

Tim Fuller

President, SRS Inc.

Connect on LinkedIn →

Protection Now, Savings Later: Why Young Families Consider Indexed Universal Life

November 3, 2026 by Tim Fuller

Young family of four sitting on a hillside at sunset, with the title Protection Now, Savings Later: Why Young Families Consider Indexed Universal Life

Young families usually need a large death benefit on a tight budget, and term life is the most affordable way to cover that need. Some families add indexed universal life (IUL) on top, or instead of part of the term, to build cash value over time and get living benefits riders in the same policy.

Key takeaways

Start with the need: enough coverage to replace income, clear debts and fund goals like college.
Term life covers the biggest need for the lowest cost.
A smaller IUL alongside term adds cash value, lifelong coverage and optional living benefits.
Only add IUL if you can fund it consistently for many years.

Start with the need

The first job of life insurance for a young family is replacing income so the family can keep the home, stay on track with savings and cover childcare and college if a parent dies. A needs analysis adds up income replacement, debts, final expenses and goals, then subtracts savings and existing coverage. See how SRS approaches income replacement.

Term, permanent or both

	Term life	Indexed universal life
Cost for the same death benefit	Lowest	Higher
How long it lasts	A set term, such as 20 or 30 years	For life, if funded
Cash value	None	Yes, credited based on an index with a floor
Living benefits riders	Available on some policies	Commonly available
Best for	Large, temporary needs	Lifelong coverage plus long-term savings

A common blend is term for most of the need, which usually falls away as the kids grow and the mortgage shrinks, and a smaller IUL that keeps going for life and builds cash value the family can use later.

The right answer for most young families is not term or permanent. It is how much of each.

Living benefits in the same policy

Many IUL policies offer chronic, critical and terminal illness riders that let you advance part of the death benefit if you are seriously ill. For a young family, that can mean help with bills during a cancer treatment or after a stroke. These riders are not the same as disability or long-term care insurance, and terms vary by carrier.

When IUL is the wrong fit

The budget only covers the coverage you need, and IUL would mean buying less protection.
You may need the money back within 10 to 15 years.
You are not sure you can keep funding it. An underfunded policy can lapse.
Emergency savings and employer retirement matches are not in place yet.

Frequently asked questions

How much life insurance does a young family need?

A common starting point is enough to replace income for the years the family would need it, plus debts, final expenses and goals like college. A needs analysis gives a more precise number.

Can I convert term to permanent later?

Many term policies include a conversion privilege that lets you switch to permanent coverage without a new medical exam, within a set window.

Should both parents be insured?

Usually yes. A stay-at-home parent provides childcare and household work that would be expensive to replace.

Is IUL a good place for my emergency fund?

No. Cash value builds slowly and early surrender charges apply. Keep emergency savings in a bank account.

50+ Years in Business60+ Top-Rated Carriers★★★★★ Rated by Advisors

Reviewed by Tim Fuller on 2026-09-30

Tim Fuller

President, SRS Inc.

Connect on LinkedIn →

How Business Owners Use Indexed Universal Life

Executive bonus plans (Section 162)

Key person protection

Funding buy-sell agreements

Retirement money for the owner

Frequently asked questions

Tim Fuller

We’re Here to Help

How to Start the Long-Term Care Conversation With Clients Who Avoid It

Why advisors need to raise long-term care first

Ask one question: “What’s your plan for extended care?”

Lead with family, not dollars or odds

Handle “It won’t happen to me” with longevity

Solve for home care first

Long-term care conversation questions

Tim Fuller

We’re Here to Help

Protection Now, Savings Later: Why Young Families Consider Indexed Universal Life

Start with the need

Term, permanent or both

Living benefits in the same policy

When IUL is the wrong fit

Frequently asked questions

Tim Fuller

We’re Here to Help

Tim Fuller