Why High-Net-Worth Individuals (HNWIs) Value Indexed Universal Life (IUL) Policies

Indexed Universal Life (IUL) insurance policies have become increasingly popular among high-net-worth individuals (HNWIs) due to their unique combination of tax advantages, growth potential, and estate planning benefits. In this blog post, we will explore key data points that illustrate why wealthy individuals are drawn to IULs as a vital component of their financial strategies.

1. High Usage Among Wealthy Individuals

A 2018 LIMRA Study found that more than 40% of households with a net worth of $5 million or more own some form of permanent life insurance, including IULs. This statistic underscores the appeal of IULs among the affluent, who appreciate the flexibility and tax benefits these policies offer for growing and protecting their wealth.

Source: LIMRA 2018 Insurance Ownership Study, available through LIMRA.

2. IUL Sales Growth Among HNWIs

Sales of IUL policies grew by 15% in 2020, according to reports from Wink's Sales & Market Report. Much of this growth was attributed to wealthy individuals seeking a balance between market participation and downside protection, particularly in the face of volatile financial markets. The upward trend highlights the increasing reliance on IULs as a financial instrument in uncertain times.

Source: Wink's Sales & Market Report 2020, available at Wink.

3. Popular for Estate Planning

According to Ernst & Young, approximately 50% of ultra-high-net-worth individuals (UHNWIs)—those with a net worth of $30 million or more—utilize life insurance, including IULs, as part of their estate planning strategies. By integrating IULs into their financial plans, these individuals can effectively avoid estate taxes and pass wealth onto heirs in a tax-efficient manner, thereby preserving their legacy.

Source: Ernst & Young's wealth planning strategies, available at EY.

4. High Tax Savings Potential

Data from the American Council of Life Insurers (ACLI) indicates that HNWIs using IULs can save as much as 40% in taxes over their lifetimes. The tax-deferred growth and tax-free withdrawals offered by IULs make them a highly tax-efficient alternative to traditional taxable investment vehicles. This ability to enhance savings while minimizing tax liabilities is a significant motivator for wealthy individuals considering IULs.

Source: American Council of Life Insurers (ACLI), available at ACLI.

5. Wealth Managers Recommend IULs

A survey conducted by Spectrem Group revealed that 42% of wealth managers recommend IULs as part of a diversified investment and estate planning strategy for their high-net-worth clients. This recommendation is driven primarily by the policy’s capacity to protect wealth from market volatility while offering tax-advantaged growth, making it a strategic choice for financially savvy individuals.

Source: Spectrem Group HNWI Wealth Management Study, available at Spectrem.

Conclusion

Indexed Universal Life (IUL) policies are proving to be highly valued by high-net-worth individuals for their unique blend of tax advantages, long-term growth potential, and estate planning benefits. As more wealthy individuals incorporate IULs into their financial strategies, these policies are becoming a crucial tool for wealth preservation and growth. For those looking to enhance their financial planning and secure their legacies, exploring the benefits of IULs could be a transformative step.