Can You Borrow Money from an Indexed Universal Life (IUL) Insurance Policy?

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

What is an Indexed Universal Life (IUL) Insurance Policy?

An Indexed Universal Life (IUL) insurance policy is a type of permanent life insurance that includes an investment component. The cash value of the policy grows based on a stock market index, like the S&P 500.

Borrowing Against an IUL Policy

Yes, you can borrow money from an IUL policy. This is one of the key features that attract individuals to purchase IULs.

How Borrowing From An IUL Works

  • Tax-Free Loans: Policyholders can take out loans against the cash value of their IUL policy. This money is typically tax-free.
  • Interest Rates: The loans come with interest rates, but they are generally lower compared to traditional loans.
  • No Repayment Schedule: Unlike a conventional loan, there is no mandatory repayment schedule for loans taken against an IUL policy.
  • Impact on Policy: The loan amount and any accrued interest can reduce the death benefit if not repaid.

Advantages of Borrowing from an IUL

  1. Tax Benefits: The primary advantage is the tax-free nature of the loan.
  2. Flexibility: It offers liquidity and financial flexibility, especially in emergencies or investment opportunities.
  3. No Credit Checks: Loans from an IUL do not require credit checks or a lengthy approval process.

Considerations Before Borrowing

  • Policy Performance: Borrowing can impact the policy’s performance, potentially reducing the death benefit.
  • Interest Accumulation: If the loan plus interest grows too large, it could diminish the policy’s value or cause it to lapse.

Comparing IUL Loans and Traditional Loans

FeatureIUL LoanTraditional Loan
Interest RateGenerally lowerVaries, usually higher
Tax ImplicationsTax-freeTaxable (if applicable)
Repayment ScheduleFlexibleFixed
Impact on Credit ScoreNo impactCan impact
Approval ProcessInstant, no checksMay require credit check


Borrowing from an IUL policy is a flexible and tax-efficient way to access funds, making it an attractive feature of indexed universal life insurance. However, it’s crucial to understand the implications of your policy and ensure it aligns with your financial goals.

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Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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