Tax-Deferral

Tax-Deferral refers to the advantage that allows policyholders to accumulate cash value gains without paying taxes on the earnings immediately. Instead, taxes on the interest, dividends, or capital gains within the policy are postponed until the policyholder withdraws funds from the policy. This allows the cash value to grow more quickly as it compounds over time without the drag of taxation. IUL policies are particularly attractive for tax-deferral as they offer potential for growth tied to a market index, while also providing a floor that protects the cash value from market downturns.