Originally Posted by antsinfla
Thanks for the welcome!
Previous correspondence refers - for the record: The cash value in an IUL may be taken out as withdrawals or policy loans and is regarded as tax free income. In essence, using the death benefit as a lifetime benefit - hence the use of a life (I call death) insurance contract from a retirement income planning perspective - particularly if you are in a higher tax bracket. Indeed you are partially correct "the death benefit from life insurance might be tax free" - it is.
As I recall, surrenders up to the amount of premiums paid is not taxable (since it is essentially a return of "principal") but surrenders in excess of premiums paid are taxable so your statement above that withdrawals are tax-free is only partially correct. You are correct that loans are not taxable. However, the post I was referring to trumpeted IUL as providing "tax-free income" and while IUL withdrawals/loans can be constructed to in effect make income/return of premium tax free upon death it isn't tax-free income like muni interest or my qualified dividends.
I'm actually totally correct on death benefits - there are cases where death benefits are not tax free (for example, stranger owned life insurance death benefits are taxable).