Want to know the secret of how Walt Disney started Disneyland? After being turned down by his bank for a basic business loan, Disney turned to life insurance to finance his dream of opening a theme park. The proceeds from his life insurance policy were used to open Disneyland, “The Happiest Place on Earth.”
But how did this work? His life insurance policy basically accumulated cash value and he was able to withdraw this money as a policy loan. This accumulated value was tax-free and was used by Disney to create a tax-free income.
So, what exactly was this asset Disney used?
In today’s term, this asset is called the Indexed Universal Life Insurance (IUL). An IUL is a type of cash value life insurance policy that has both death benefits and an accumulation element. Rather than placing investments in the market where it could be lost, investments in an IUL are put into a strategy that mirrors an index like the S&P 500, allowing the participant to realize most of the gains in the market. These gains are then locked in to protect against potential losses.
Basically, this allows for people to invest in the market without taking losses, which makes IULs appealing to professionals and business owners. Another benefit is that it allows cash value within the policy to grow tax-free. Since IULs are funded with post-tax dollars, clients can withdraw money tax-free and, essentially, have a tax-free income at a future date.
Compared to IRA or a 401(k), IULs are more flexible. There is no limit on how much money can be added annually, as long as the added cash doesn’t create a Modified Endowment Contract (MEC), which is taxable. There are also no restrictions on when the money can be taken out, unlike the IRA.
As a life insurance policy, IULs provide financial security to the family in the event of death of disability. In an event of the policyholder’s death, the death benefits are received tax-free in a lump sum by the beneficiary.
IULs are perfect for those who want to experience the gains of the market without facing the losses. They are perfect comprehensive and flexible wealth building options that can be tailored to each person’s financial plan.
Want to know more about IULs and other life insurance policies? Contact CorpStrat to learn more about how our 21st Century strategies can revolutionize your life and business.