Conversation 1: Cost effective IUL policy design
Indexed Universal Life (IUL) insurance policies continue to gain popularity among clients. According to LIMRA, IUL sales have experienced eleven consecutive quarters of new premium growth. IUL sales represented nearly a quarter of all individual life insurance premium in the second quarter of 2019.
The appeal of IUL is its combination of market growth potential and market loss protection. Today’s IUL policies also offer greater financial planning flexibility for clients, with a range of indexed earning options that can be tailored to risk-tolerance levels, from conservative accounts to accounts that offer higher return potential.
In the past, it was common to take a blanket approach to allocation, directing all premiums to a single account, and ‘setting it and forgetting it.’ However, many carriers now offer IUL policies that allow premiums to be allocated across multiple indexed accounts, with the ability to make changes over time in response to different market conditions or changing client needs and objectives.
As advisors sit down with their clients to discuss an optimal design for their new IUL policy, they should begin by reviewing the client’s priorities and asking a few basic questions, including:
What is more important to you, growth or protection?
Are you interested in receiving the highest possible returns for an extra charge?
Would you like to earn guaranteed positive crediting every year—even in a down market?
Do you think the market will produce positive returns year after year?
The answers to these questions can help determine a more strategic allocation approach that aligns with the client’s cost expectations and without having to sacrifice upside potential.