Life insurance is more than a death benefit. As clients approach retirement, their concerns shift from income replacement toward outliving their savings and paying for health care. A properly designed indexed universal life policy can speak to those concerns, and positioning its living benefits can help you win more cases.
Key takeaways
- Three common pre-retirement uses of IUL are college expenses, supplemental retirement income and long-term care or chronic illness costs.
- IUL offers access, growth and protection: liquidity through withdrawals and loans, index-linked crediting with a floor, and a flexible death benefit.
- Design matters. Funding level, loan strategy and riders determine how well a policy delivers these benefits.
There are numerous living benefits attached to life insurance, and they are available long before the death benefit is ever paid.
Why living benefits win cases
Many clients push back on life insurance because they see it only as money for someone else after they die. Showing how a policy can help them while they’re alive changes the conversation. For a broader overview, see the living benefits of permanent life insurance.
Three pre-retirement uses of IUL
- College expenses. Accumulated cash value can be accessed through withdrawals or policy loans to help pay for a child’s or grandchild’s education.
- Supplemental retirement income. A properly funded policy can provide a stream of withdrawals and loans that may be income-tax-free, alongside Social Security and qualified plans.
- Long-term care and chronic illness costs. Many IUL policies offer a chronic illness or long-term care rider that lets the insured accelerate part of the death benefit if they qualify.
Access, growth and protection
- Access: Cash value can be reached through withdrawals and policy loans, generally without income tax if the policy stays in force and isn’t a modified endowment contract.
- Growth: Interest is credited based on the performance of an index such as the S&P 500, subject to caps or participation rates. A floor, often 0%, means index credits don’t go negative when the market falls, though policy charges still apply.
- Protection: Flexible death benefit options, plus riders that can provide funds for chronic illness or ongoing care.
Positioning it responsibly
Illustrate at reasonable crediting rates, show how loans reduce the death benefit, and make sure the premium is one the client can sustain. Our life sales team can help you design the policy, choose riders and build a presentation that explains these features clearly.
Frequently asked questions
What are the living benefits of indexed universal life?
IUL cash value can be accessed during life for needs like college costs or supplemental retirement income, and many policies include riders that accelerate the death benefit for chronic illness or long-term care.
Can clients lose money in an IUL when the market drops?
Index credits typically have a floor, often 0%, so a market decline doesn’t produce a negative credit. However, policy charges continue, so cash value can still decrease in years with little or no credited interest.
Are IUL withdrawals and loans tax-free?
They can be income-tax-free when the policy is structured properly, stays in force and isn’t a modified endowment contract. Loans reduce the death benefit, and a lapse with a loan outstanding can create taxable income.
Reviewed by Tim Fuller on 2026-09-26
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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