Why Some People Use an IUL as Part of Their Long-Term Care Strategy

Some policies may support broader retirement and care planning goals

7/20/2026

When planning for potential long-term care needs in retirement, many people look for solutions that offer both financial protection and flexibility. One option that may be considered as part of a broader strategy is an indexed universal life (IUL) insurance policy. While an IUL is not designed to replace long-term care insurance, it may provide additional financial resources in certain situations when coordinated with other planning strategies.

What Is an Indexed Universal Life (IUL) Policy?

An indexed universal life (IUL) policy is a type of permanent life insurance that provides a death benefit and includes a cash value component. Cash value has the potential to grow based in part on the performance of a market index, subject to policy caps, participation rates, spreads, and floors. Cash value growth is not a direct investment in the stock market, and policy performance depends on the terms of the contract.

Some IUL policies offer optional riders that may allow access to a portion of the death benefit if certain qualifying events occur, such as a chronic or terminal illness. Rider availability, eligibility requirements, costs, and benefits vary by insurer and policy.

How an IUL May Support a Long-Term Care Strategy

For some individuals, an IUL may provide financial flexibility that can complement an overall retirement and long-term care strategy. Depending on the policy and its performance, accumulated cash value may be available through policy loans or withdrawals. Some policyowners use these features to help address unexpected expenses, including costs associated with care needs.

Optional living benefit riders, when included and if eligibility requirements are met, may also provide access to a portion of the policy's death benefit during the insured's lifetime. Accessing policy values or accelerated benefits will generally reduce the remaining death benefit and may reduce the policy's cash value.

An IUL is not intended to replace dedicated long-term care insurance. Instead, it may be one component of a broader financial strategy that could also include long-term care insurance, annuities, retirement savings, investment accounts, or other financial resources.

Important Considerations

Indexed universal life insurance is a long-term financial product that requires ongoing funding and management. Policy performance can be affected by premium payments, policy expenses, loan activity, credited interest, and other contract provisions. Insufficient funding or excessive policy loans may negatively affect policy performance and could result in policy lapse.

Eligibility for optional living benefit riders is determined by the policy contract and applicable claim requirements. Accessing cash value or accelerated benefits may have tax consequences. Individuals should consult their tax professional regarding their specific circumstances.

Policy illustrations are hypothetical and are designed to demonstrate how a policy may perform under certain assumptions. Actual results will vary and cannot be guaranteed.

The Value of Independent Guidance

As an independent brokerage, Lenhoff Financial works with multiple insurance carriers and product options rather than representing a single company. This allows clients to compare different policy features, costs, and available riders to help determine which solutions may be appropriate for their individual goals and financial situation.

Every person's needs are unique. Whether an indexed universal life policy belongs in your overall retirement and long-term care strategy depends on your objectives, financial resources, risk tolerance, and other planning considerations.

If you're considering your options, speaking with a licensed insurance professional can help you better understand how an IUL works, its potential advantages and limitations, and whether it may be appropriate as part of your overall financial strategy.

This content is for educational purposes only and is not intended as financial, tax, or legal advice.

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