It´s better to have a Life Insurance and not need it, than need it and not have it.

Indexed Universal Life Insurance (IUL)

Indexed Universal Life Insurance (IUL) is a type of permanent life insurance that allows policy holders to accumulate cash value. Your policy´s cash value is based on the performance of one or more stock market indexes, such as the S&P 500 Index. Your policy´s cash value increases when the stock market index goes up.

“It’s important to understand what indexing is since this is an index product”.

The index strategy where you make market like returns but you’re protected from stock market downturns, so let me explain how indexing works you choose an index like the S&P 500 for example your money is not invested in the index, so it’s not in the stock market but you get the return based on the movement of the index your money growth is however the index performs up to a limit or a cap let’s say 12% now if the market grows 15% your money will only grow up to that 12% cap but the tradeoff is complete downside protection from market losses, so just like you would have a cap you would also have a floor of 0, so the worst thing that could happen is you get 0 interest during market downturns; in other words you lose nothing ever because of the floor.

“We also need to understand Section 7702 of the U.S. Internal Revenue Service (IRS) Tax Code”.

Section 7702 defines what the federal government considers to be a legitimate life insurance contract and is used to determine how the proceeds the policy generates are taxed.

What is the 7702 rule?

A 7702 plan refers to a cash-value life insurance policy, which is a life insurance policy that has a cash value beyond the death benefit. When you pay premiums into these kinds of policies, some of the premium goes to the death benefit and some of the premium goes to the policy´s cash value.

Life Insurance is the biggest benefit in the IRS tax code. It’s the best way to leverage money and build wealth. Money comes out tax free and there is no limit to this tax break, so I want you to sit on that and remember that IUL could be an alternative to all wage earners who are looking to supplement their tax fee retirement income.

IUL is a perfect tool purpose strategy for those high-income earning individuals an engineer for someone who is looking to maximize his tax-free retirement income and have that insurance component in case you did pass away early that you can leave to your heirs.

IUL vs Roth IRA

1. MARKET PROTECTION, as you’ll notice, IULS are not invested directly into the market. It’s what we call indexing where the insurance carrier is allowing you to participate in marketing market equity-based returns but not participate in the volatility and the downside risk.

And they do this through the use of indexing where the insurance carrier is going to purchase options on the market tied to the index that you’ve chosen and one year later, they’ll call in that option if that value is higher and credit your policy accordingly, so it’s very important that these are fixed contracts where we’re able to earn equity-based returns without risking that principle.

2. NO CONTRIBUTION LIMITS, this is huge for those ultra-high net worth those high-income earners that are been phased out from a Roth IRA and are pretty much fund into these policies as much as they possibly can, the caveat to that is that it can only be over a period of time. Unfortunately, it will not take a single premium by doing that that would create a Modified Endowment Contract (MEC) we don’t want to do that because we’ll lose all the benefits that we talked about earlier.

3. PRINCIPLE PROTECTION alluded to market protection. Insurance carriers are going to receive 95% of your premium and put that into the general portfolio which is composed of highly graded triple A investment bonds, and ultimately you’re going to get your behold at the end of the year they’re going to take that other portion and purchase options on the market providing that upside potential, so keep that in mind your nest egg and money will always be safe.

4. FAVORABLE ACCESS TO CASH VALUE, This is huge! essentially, you’re able to be your own bank the wealthy understand it, and you should too where you’re able to take out loans from your policy as it still participating tied to the index, we’re able to create that net positive game where we’re able to create that sustainable income stream that will never outlive.

5. THE TAX-FREE SURVIVOR BENEFIT. The question is would you rather leave your money with your family or with the IRS? In addition to this is a great way to protect from estate future tax hikes and increases, so keep that in mind. 

Now the good news is that you’re able to access that money while you are still alive to pretty much do anything you want, and you can access it tax free and when you do pass away your death benefits still gets paid out to your beneficiaries so life insurance is not just about when you pass away and the money getting transferred to your loved ones you can actually use it as a tool while you are still alive to build wealth.

Buying a life policy is an act of love

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