Why Buy an Indexed Universal Life (IUL) Insurance Policy?

Why Buy an Indexed Universal Life (IUL) Insurance Policy? And how this can make you work as your own bank

An Indexed Universal Life (IUL) insurance policy is a versatile financial product that offers several benefits, making it a compelling choice for those seeking both life insurance coverage and a means to grow their wealth. This article explores why you should consider an IUL, how it can help you become your own bank, and the specific advantages offered by companies like AIG, including chronic, critical, and terminal illness coverage.

Becoming Your Own Bank

One of the most attractive features of an IUL is the potential to become your own bank. Here’s how it works:

  1. Cash Value Accumulation: An IUL policy accumulates cash value over time, which is linked to the performance of a market index, such as the S&P 500. This allows your cash value to grow tax-deferred.
  2. Policy Loans: You can borrow against the cash value of your policy. These loans do not require credit checks and are not reported to credit bureaus. The interest rates on these loans are often lower than those of traditional loans.
  3. Tax-Free Loans: Loans taken against the cash value of your IUL are generally tax-free, providing a tax-efficient way to access funds.
  4. Repayment Flexibility: Unlike traditional loans, there is no mandatory repayment schedule. You can repay the loan on your terms, or even not at all, with the understanding that unpaid loans will reduce the death benefit.

By leveraging these features, you effectively create a personal banking system where you can borrow and repay funds as needed, using the cash value in your IUL policy as collateral.

Never Losing Money

One of the key benefits of an IUL is the guarantee that you will never lose money due to market downturns. Here’s how this works:

  1. Market Participation with a Floor: While the cash value growth is linked to a market index, IUL policies typically include a guaranteed minimum interest rate (floor), often around 0-1%. This means that even if the market performs poorly, your cash value will not decrease.
  2. Cap on Earnings: There is usually a cap on the maximum interest rate you can earn, but the security of never losing your initial investment provides peace of mind and financial stability.

Additional Coverage with AIG

Companies like AIG offer additional benefits with their IUL policies, enhancing the value of the policy:

  1. Chronic Illness Coverage: This rider provides access to the death benefit while you are alive if you are diagnosed with a chronic illness, helping to cover medical expenses and other costs.
  2. Critical Illness Coverage: Similar to chronic illness coverage, this rider allows you to access the death benefit upon diagnosis of a critical illness such as cancer or heart disease.
  3. Terminal Illness Coverage: This rider provides a portion of the death benefit if you are diagnosed with a terminal illness, offering financial support during difficult times.


An IUL policy is a powerful financial tool that offers the dual benefits of life insurance and investment growth, with the added advantage of becoming your own bank. By guaranteeing no loss of money due to market downturns and offering additional coverages like those provided by AIG, an IUL can be a cornerstone of a robust financial strategy.

For more information or to discuss your specific needs, contact broker Anil Aggarwal at 732-877-8585.

How Wealthy Individuals Like the Rockefellers Use IUL to Build Generational Wealth

Wealthy individuals and families, including the Rockefellers, have effectively used life insurance policies like Indexed Universal Life (IUL) to build and preserve wealth across generations. Here’s how they leverage these financial tools:

Wealth Accumulation and Tax Benefits

  1. Tax-Deferred Growth: IUL policies allow the cash value to grow tax-deferred. This means that the investments grow without the drag of annual taxes, maximizing the compounding effect over time.
  2. Tax-Free Withdrawals: Policyholders can access the cash value of their IUL through loans and withdrawals, which are generally tax-free. This provides a source of income that doesn’t count as taxable income, reducing overall tax liabilities.
  3. Death Benefit: The death benefit from an IUL policy passes to beneficiaries tax-free, providing a substantial inheritance without the burden of estate taxes.

Asset Protection and Estate Planning

  1. Protected from Creditors: In many jurisdictions, life insurance policies are protected from creditors. This means that the cash value and death benefit cannot be seized to pay off debts, preserving wealth for future generations.
  2. Estate Equalization: Life insurance can be used to equalize estates among heirs. For example, if one heir inherits a family business, others can be compensated with the life insurance proceeds.
  3. Trusts: Wealthy families often place life insurance policies in trusts, such as Irrevocable Life Insurance Trusts (ILITs), to keep the death benefit out of the taxable estate and provide additional control over how the proceeds are distributed.

Becoming Your Own Bank

Wealthy individuals use the concept of becoming their own bank to maintain liquidity and fund large expenses or investments without liquidating other assets. Here’s how it works:

  1. Policy Loans: They borrow against the cash value of their IUL policies. These loans are generally at lower interest rates and do not require repayment schedules, unlike traditional bank loans.
  2. Investment Opportunities: The borrowed funds can be used to invest in other opportunities, such as real estate or business ventures, potentially generating higher returns than the interest cost of the loan.
  3. Flexibility and Control: By using policy loans, they maintain control and flexibility over their finances, avoiding the need to sell off investments or assets at inopportune times.

Examples of Wealthy Families Using Life Insurance

  1. The Rockefellers: The Rockefeller family has long been associated with using life insurance to perpetuate wealth. They established trusts and used life insurance policies to ensure that their wealth would be preserved and managed across generations. By doing so, they avoided significant estate taxes and maintained financial control.
  2. Walt Disney: Walt Disney reportedly used life insurance policy loans to help fund the development of Disneyland. This provided him with the necessary capital without having to rely on traditional financing methods.
  3. J.C. Penney: During the Great Depression, J.C. Penney borrowed against his life insurance policy to meet payroll and keep his company afloat. This move allowed him to survive the financial crisis and ultimately preserve his business empire.


Wealthy individuals and families, including the Rockefellers, have used IUL and other life insurance products to build, preserve, and transfer wealth across generations. By taking advantage of the tax benefits, asset protection, and flexibility offered by these policies, they ensure financial stability and growth, providing a lasting legacy for future generations.

For personalized advice on how an IUL can benefit you, contact broker Anil Aggarwal at 732-877-8585.

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