06/27/2025
THE TRUTH BEHIND THE COST OF AN INDEXED UNIVERSAL LIFE POLICY (IUL)
Hi. My name is Paul Belcher. I want to uncover the truth behind the cost of an IUL. Now there are a lot of ways to structure or design an IUL but only one way to do it correctly, and that is a maximum-funded design where we buy the least amount of life insurance that the IRS will allow and fund right up to the Internal Revenue Code guidelines. I want to do an analysis on the cost associated with a maximum-funded IUL.
First, I’m going to talk about the IUL expense ratio. Now, what I’m going to use for this analysis is a 45-year-old male in good health, a $1 millioon-dollar death benefit, funding the maximum contributions into the policy that the IRS will allow over a 10-year timeframe. Keep in mind, the IUL expenses will differ for each client primarily based on three things: First, the design of the policy. The maximum-funded design is going to have lower policy expenses than a minimum-funded design. Second is the insurance company selected. Some insurance companies’ policies have higher expenses or lower expenses than others. And lastly, the age, gender, and health of the insured. Generally speaking, the older you are, the elss healthy you are, the higher the expenses are going to be.
The annual IUL expenses as a percentage of the account value are higher in the early years and lower in the latter years. If you look at the IUL expense ratio to age 100, the average expenses are 1.03%, which is in line with most other financial vehicles out there. If we look at the first 10 years alone, the average expenses are about 4.76% which we would conclude is expensive during the funding or building period. However, again, the average expense ratio to age 100 is 1.03% IMPORTANT POINT- The IUL is a tax-advantaged vehicle for the long run. They are quite efficient when you keep and use them for the purpose they were designed.
I’ll be happy to show you the comparison of the rate of return in an IUL vs. an alternative in the free strategic assessment that I offer anyone!
