9 Reasons to Choose a Multi-Pay IUL Over Premium Financing

9 Reasons to Choose a Multi-Pay IUL Over Premium Financing

Premium financing may seem like an attractive way to fund an Indexed Universal Life (IUL) policy, but it comes with significant risks, including rising loan interest rates, margin calls, and collateral requirements. Many high-net-worth individuals (HNWIs) and financial professionals are now shifting towards multi-pay IUL structures as a more cost-effective, flexible, and secure alternative.

In this article, we break down the top 9 reasons why multi-paying an IUL is the superior choice over premium financing, ensuring long-term financial stability, full policy benefits, and total control over your investment.

1. Lower Costs & No Loan Interest‍

Multi-pay IULs eliminate the costs associated with premium financing, such as high loan interest rates, administrative fees, and lender charges. This results in a significantly lower total cost over time.

2. No Loan Repayment or Recapture Risk‍

Premium financing requires ongoing loan repayments and exposes policyholders to potential lender recapture, where banks demand early loan repayment. A multi-pay IUL removes this risk entirely.

3. No Collateral, Margin Calls, or Bank Control‍

Unlike premium-financed policies, multi-pay IULs do not require assets under management (AUM), cash deposits, or the policy as collateral. This ensures you retain full control over your policy without the risk of margin calls or lender interference.

4. Full Death Benefit for Beneficiaries‍

With premium financing, any outstanding loan is deducted from the death benefit, reducing the payout to loved ones. A multi-pay IUL guarantees that beneficiaries receive the full policy value, making it a superior wealth transfer strategy.

5. Greater Policy Flexibility & Access to Cash Value‍

Multi-pay IULs allow policyholders to access the cash value through policy loans and withdrawals at any time—without lender-imposed restrictions or approval requirements. No insurer policy loans or withdrawals would be available on a bank premium financed policy.

6. No Unexpected Tax Consequences‍

If a premium-financed IUL lapses or is surrendered with an outstanding loan, policyholders may face significant taxable income from the forgiven debt. A multi-pay IUL eliminates this risk, ensuring tax-efficient policy management.

7. Easier Exit Strategy & Simplified Financial Planning‍

Premium financing requires a complex exit strategy that depends on market conditions, rising policy values, and loan repayment plans. A multi-pay IUL removes this uncertainty, offering a straightforward, predictable financial plan.‍

8. More Efficient Wealth Transfer & Estate Planning‍

With no debt tied to the policy, a multi-pay IUL ensures that the full policy value passes to heirs, making it a highly effective tool for estate planning and intergenerational wealth transfer.

9. Stronger Policy Guarantees & Easier Underwriting

Multi-pay IULs retain all policy guarantees and typically have a smoother underwriting process, as insurers often impose additional requirements on premium-financed policies.

Conclusion

While premium financing may seem appealing at first, the risks and costs far outweigh the benefits. Rising loan rates, margin calls, and lender control can create financial uncertainty and reduce the overall effectiveness of your IUL policy.

A multi-pay IUL is the smarter, safer, and more flexible choice, offering lower costs, full policy control, and a more secure financial future for you and your heirs.

Thinking about funding an IUL? Contact an IUL expert today to explore the benefits of a multi-pay IUL and discover a tailored solution for your financial goals.

Disclaimer

This article is authored by Carlton Crabbe, Chief Executive Officer of Capital for Life, a specialist indexed universal life insurance broker. The information provided in this article is for educational and informational purposes only and should not be construed as financial or investment advice. While the author possesses expertise in the subject matter, readers are advised to consult a qualified financial advisor before making investment decisions or purchasing life insurance products.