What Fees Are Actually Inside an IUL Policy? A Breakdown of IUL Costs

Ask one person about indexed universal life and they’ll tell you:

“IULs are loaded with fees.”

Ask someone selling one and you might hear:

“Don’t worry about the fees. Look at the benefits.”

I don’t like either answer.

If you’re considering putting serious money into an IUL for retirement, you should know exactly what can cost money inside the policy.

Not because every fee automatically makes an IUL bad.

And not because a policy with lower fees automatically wins.

You need to know what you’re paying, what you’re getting for it, and what the policy is projected to produce after those costs.

Let the math do the talking.

Does an IUL Have Fees?

Yes.

An indexed universal life policy is permanent life insurance. It has insurance costs and can have several other charges associated with maintaining the contract and its features.

The exact charges vary by policy.

Common categories can include:

• Premium-related charges
• Cost of insurance
• Monthly administrative or policy charges
• Rider charges
• Surrender charges
• Policy-loan costs
• Other charges or adjustments specified by the contract

But here’s where the conversation gets more interesting.

Not every economic cost inside an IUL appears as a line item labeled:

“FEE.”

That’s Why Asking “What’s the Fee?” Isn’t Enough

You can have two policies with very different structures.

One might have a particular premium charge.

Another might have different insurance costs.

One might have different surrender provisions.

Another might have different indexed-crediting terms.

One might have different policy-loan mechanics.

If you compare one isolated fee, you can completely miss the larger economic picture.

Fee #1: Premium-Related Charges

Depending on the policy, a portion of premium can be subject to premium-related charges before the remaining amount contributes to policy values under the contract.

Suppose you pay:

$10,000.

You should not automatically assume every penny of that $10,000 instantly becomes cash value.

That’s one reason early cash value can be lower than cumulative premiums paid.

The exact premium charges and mechanics are policy-specific.

Why Premium Charges Matter More During Heavy Funding

If you’re intentionally funding an IUL aggressively for cash-value accumulation, even a seemingly small premium-related charge can add up across years of contributions.

So don’t just ask:

“How much am I putting in?”

Ask:

“How much of that premium is actually reflected in policy value after the applicable charges?”

Fee #2: Cost of Insurance

Cost of insurance, commonly called COI, is one of the central costs inside an IUL.

Remember what you’re buying.

This isn’t simply a cash-value account.

It’s life insurance.

The insurance company is providing a death benefit and assuming mortality risk.

There is a cost associated with that.

COI Is Not Necessarily a Flat Annual Percentage of Your Cash Value

This gets misunderstood all the time.

The cost-of-insurance rate and the actual dollar amount deducted from the policy are different concepts.

The applicable COI calculation can involve factors specified in the policy, such as:

• Attained age
• Underwriting classification
• Sex where permitted
• Applicable amount of insurance risk
• Death-benefit structure
• Other contractual factors

The actual contract controls.

And COI Can Become More Expensive at Older Ages

That’s why we gave this issue its own article.

As the insured ages, the applicable mortality-cost rate can rise under the policy’s COI schedule.

But you still need to look at the amount of insurance risk to which that rate applies.

A rising COI rate does not automatically tell you the exact dollar charge that will hit the policy decades later.

Fee #3: Monthly Administrative or Policy Charges

An IUL can also include administrative charges.

These can be structured in different ways under different contracts.

They might look small compared with the premium or death benefit.

But retirement planning is a long game.

A charge that exists month after month for years should still be included in the projection.

Again, I don’t want:

“It’s only a small monthly charge.”

I want:

“Show me what the policy looks like after every contractual charge is included.”

Fee #4: Rider Charges

Life insurance policies can include optional or built-in riders that modify coverage or provide additional benefits.

Some riders may have explicit charges.

Others may have different economic structures.

Examples can involve benefits associated with:

• Chronic illness
• Critical illness
• Disability-related features
• Waiver provisions
• Additional insureds
• Other policy-specific benefits

Don’t assume a rider is free because the brochure spends more time describing the benefit than the cost.

Check the actual policy and illustration.

And Don’t Add a Rider Just Because It Sounds Good

This is where people can turn a focused retirement strategy into a Swiss Army knife.

They hear about another feature and say:

“Sure, add that too.”

But every feature should have a reason for being there.

What problem is it solving?

What does it cost?

What changes in the illustration if you remove it?

That’s how I would evaluate it.

Fee #5: Surrender Charges

This is one of the biggest reasons IUL should not be treated like a short-term savings account.

Many permanent life insurance policies include a surrender-charge schedule.

If you surrender the policy during the applicable surrender-charge period, the amount available to you can be lower than the policy’s gross accumulated value because of the applicable surrender charge.

Cash Value and Cash Surrender Value Can Be Different

This distinction matters.

You might see one policy value on an illustration and assume:

“That’s what I can walk away with tomorrow.”

Not necessarily.

Look at the applicable cash surrender value.

If surrender charges still apply, the amount available upon surrender can be different.

Why Do Surrender Charges Matter for Retirement Planning?

Because life changes.

You might fund the policy expecting to keep it for decades.

Then five years later something happens.

You need liquidity.

Your priorities change.

Your business changes.

Your income changes.

You decide you don’t want the policy anymore.

That’s when the surrender schedule stops being a line on a page and becomes real money.

This Is Why IUL Requires a Long-Term Mindset

If you know there’s a strong chance you’ll need all of the money back in two or three years, that should be part of the suitability discussion before the policy is purchased.

Don’t use long-term insurance for a short-term objective and then act surprised when the contract behaves like a long-term product.

Cost #6: Policy-Loan Interest

Now we get to an area that creates a lot of confusion.

If you borrow against an IUL, the policy loan has an applicable cost.

That loan cost is not the same thing as COI.

It’s not the same thing as an administrative charge.

And it’s not automatically included when somebody tells you:

“This policy has low fees.”

A Policy Loan Is Still a Loan

People sometimes hear that policy loans may potentially allow access to policy values without current income taxation under certain circumstances and mentally translate that into:

“Free money.”

No.

A policy loan creates indebtedness.

Applicable loan charges accrue according to the policy.

Outstanding indebtedness can affect policy values and the net death benefit.

And excessive borrowing can increase lapse risk.

The Loan Rate Matters Even More When the Loan Is Part of the Strategy

This is especially relevant to the IUL JUMP Strategy.

The strategy uses a Matching Indexed Participating Loan.

The matching amount is created as a policy loan and redeployed into the same policy as additional funding.

That means the policy-loan cost isn’t some side issue.

It’s part of the strategy’s core math.

With the Policy Structure We Currently Use, the Applicable Loan Rate Is 5%

The applicable loan rate is currently:

5%.

The applicable loan feature has a contractual maximum loan rate of:

6%.

That distinction matters.

I would not build a retirement plan around the assumption that 5% can never change.

I’d run the current 5%.

Then I’d stress-test 6%.

Is the 5% Loan Rate a “Fee”?

I prefer calling it what it is:

the applicable cost of the policy loan.

Lumping every economic cost into one bucket called “fees” makes it harder to understand what is actually happening.

COI has one purpose.

An administrative charge has another.

A surrender charge has another.

Policy-loan cost has another.

Understand each one separately.

Then Put Them Back Together

Because your retirement doesn’t care what accounting category a cost falls into.

It cares about the final result.

How much did you contribute?

How much policy value accumulated?

How much debt exists?

How much can potentially be accessed for retirement?

How long is the policy projected to remain in force?

What’s projected to remain at death?

That’s the complete picture.

Cost #7: Indexed-Crediting Terms Can Affect the Economics Without Looking Like a Traditional Fee

This one requires careful wording.

A cap isn’t necessarily a line-item fee deducted from cash value.

A participation rate isn’t necessarily a line-item fee.

A spread used in an indexed-crediting formula is not the same thing as COI.

But these provisions can affect how much indexed interest is credited.

So if you’re evaluating the economics of an IUL, you need to look at them too.

Imagine Two Policies With the Same Explicit Charges

Suppose their visible administrative and insurance charges looked similar.

But one indexed strategy had materially different:

• Caps
• Participation rates
• Spreads
• Crediting methods

The resulting policy values could still differ.

That’s why:

“Which IUL has the lowest fees?”

is not the same question as:

“Which policy produces the strongest result under reasonable assumptions for this client’s objective?”

Lower Fees Do Not Automatically Mean More Retirement Income

Imagine Policy A costs somewhat less but produces weaker modeled policy values under the assumptions being tested.

Policy B costs somewhat more but produces stronger modeled values after all costs.

Which one is better?

You can’t answer from the fee alone.

You need the net result.

But Higher Projected Values Don’t Excuse High Costs Either

Don’t swing too far the other direction.

A big illustration doesn’t mean you stop asking what the policy costs.

If a policy’s projected performance relies on aggressive assumptions to overcome a heavy cost structure, I want to know that.

That’s why the assumptions and costs have to be examined together.

Where Can You Find the Charges?

Start with the policy illustration and other current approved policy materials.

Then read the contract.

Look for sections covering:

• Premiums
• Monthly deductions
• Cost of insurance
• Expense or administrative charges
• Riders
• Surrender values
• Policy loans
• Loan rates
• Indexed-crediting provisions
• Guaranteed and nonguaranteed values

If you don’t understand a charge, ask for it to be explained in dollars.

“Show Me in Dollars” Is One of the Best Questions You Can Ask

Percentages can hide reality.

Suppose someone says:

“This charge is tiny.”

Okay.

Show me the dollar amount.

Then show me the cumulative effect.

What is deducted in Year 1?

Year 5?

Year 10?

Age 65?

Age 75?

Age 85?

Age 95?

Now we’re having a useful conversation.

Why the Early Years Can Look Expensive

An IUL is not simply an investment account where every deposited dollar appears as liquid account value immediately.

Insurance costs, premium-related charges, surrender provisions, and other policy mechanics can make early policy values look very different from cumulative premiums.

That isn’t something to hide.

It’s something to understand before buying.

Ask This Before You Sign Anything

“If I change my mind in Year 3, what can I actually walk away with?”

Then ask the same question for Year 5.

And Year 10.

If the answer makes you uncomfortable, deal with that before funding the policy.

Now Let’s Bring in the JUMP Strategy

Suppose the client contributes:

$10,000 per year.

In the example JUMP progression:

• Years 1 and 2: $10,000 client contribution, no matching loan
• Year 3: $10,000 client contribution + $10,000 Matching Indexed Participating Loan = $20,000 total annual funding shown
• Year 5: $10,000 client contribution + $20,000 matching loan = $30,000 total annual funding shown
• Year 7: $10,000 client contribution + $30,000 matching loan = $40,000 total annual funding shown
• Year 9: $10,000 client contribution + $40,000 matching loan = $50,000 total annual funding shown
• Year 11: $10,000 client contribution + $50,000 matching loan = $60,000 total annual funding shown

The client isn’t contributing $60,000 out of pocket in Year 11.

The client’s contribution in this example remains $10,000.

The additional amount shown comes from Matching Indexed Participating Loan activity.

That Extra Funding Does Not Make the Costs Disappear

The matching amounts are policy loans.

The policy loans have an applicable cost.

Existing loans remain part of the policy economics.

Later JUMPs do not simply erase earlier indebtedness.

Meanwhile, the policy still has applicable insurance and other charges.

So if someone shows you only the larger funding amount and leaves out the other side of the ledger, you haven’t seen the strategy.

The Two-Bucket Model Helps

Think of the strategy conceptually as:

Bucket 1: client-funded dollars.

Bucket 2: Matching Indexed Participating Loan dollars redeployed into the policy.

Under the example we’re discussing, both buckets have the same potential to participate in the applicable indexed-crediting strategy with a:

10% cap

and:

0% indexed-crediting floor.

But Bucket 2 carries the applicable policy-loan cost.

That’s Why the Loan Cost Cannot Be Left Out

One historical analysis used in our JUMP modeling looked at annual S&P 500 price changes from 2006 through 2020.

Dividends were excluded.

Applying the example strategy’s 10% cap and 0% indexed-crediting floor produced an average historical indexed-crediting result of approximately:

6.87%.

Against the current applicable 5% loan rate used in the model, the simplified economic difference is:

1.87 percentage points.

But That 1.87% Is Not “After All Fees”

This is exactly why understanding the different cost categories matters.

The 1.87-percentage-point figure is simply the mathematical difference between:

6.87% historical average indexed-crediting result

and:

5% current applicable policy-loan rate.

It is not the policy’s net return.

It is not what remains after COI.

It is not what remains after administrative charges.

It is not a guaranteed profit.

And Positive Arbitrage Can Turn Negative

If indexed crediting is 3% while the applicable loan rate is 5%, the simplified economic relationship is unfavorable.

If indexed crediting is 0% while the applicable loan rate is 5%, the simplified difference is:

0% – 5% = an unfavorable 5-percentage-point relationship.

Policy charges still matter on top of that.

That’s why you stress-test the strategy.

What About Those 8.74%, 11.61%, 14.48%, and 17.35% JUMP Numbers?

Under assumptions used in one JUMP model, the combination of the base indexed-crediting assumption and the modeled positive-arbitrage effect attributed to successive Matching Indexed Participating Loans produced modeled effective results of approximately:

• 8.74% at the Year 3 JUMP
• 11.61% at the Year 5 JUMP
• 14.48% at the Year 7 JUMP
• 17.35% at the Year 9 JUMP

Those are not net returns after every fee.

They are not guaranteed returns.

They are not indexed-crediting rates.

They are not S&P 500 returns.

Applicable policy charges and other factors still need to be accounted for when evaluating the actual policy projection.

This Is Why “Our Policy Has Low Fees” Doesn’t Convince Me

Show me.

Show me the actual charges.

Show me the policy values after those charges.

Show me the outstanding loans.

Show me the surrender values.

Show me the retirement distributions.

Then show me what happens when the assumptions get worse.

How Should You Compare IUL Fees With a 401(k) or IRA?

Carefully.

A 401(k), IRA, and IUL are structurally different.

A 401(k) or IRA can have investment expenses, advisory costs, plan-related costs, transaction costs, or other expenses based on how the account is structured.

An IUL has insurance-related costs and contractual policy mechanics.

Simply comparing one expense ratio with an IUL’s COI doesn’t tell you which retirement strategy produces more spendable retirement income.

Compare the Final Retirement Math

For each strategy, use appropriate assumptions for:

• Contributions
• Employer contributions where applicable
• Investment or indexed-crediting assumptions
• Expenses
• Insurance charges
• Taxes
• Policy-loan costs where applicable
• Retirement distributions
• Longevity

Then compare what the client is projected to be able to spend.

This Is Where the Up-to-300% Number Has to Include the Costs

In certain modeled comparisons we’ve evaluated, the IUL JUMP Strategy has produced up to approximately 300% more projected retirement income than the 401(k), Traditional IRA, or comparable tax-deferred retirement strategy being evaluated.

That’s not a reason to ignore IUL fees.

It’s a reason to inspect them.

A comparison that claims a large retirement-income advantage needs to include the costs of the strategy producing that income.

The IUL Side Doesn’t Get a Free Pass

If you’re comparing the JUMP Strategy with a 401(k), don’t show the 401(k) after expenses and taxes while showing the IUL before its applicable charges.

That’s not a fair comparison.

Include the IUL policy charges.

Include the loan costs.

Include the funding mechanics.

Include the indexed-crediting assumptions.

Include the retirement-distribution assumptions.

Then run the math.

And the 401(k) Side Doesn’t Get a Free Pass Either

Use appropriate investment expenses.

Include employer contributions where applicable.

Use clearly stated market-return assumptions.

Account for the tax treatment of distributions under the assumptions being modeled.

Then compare.

No thumb on either side of the scale.

The 300% Isn’t the Sales Pitch. It’s the Question.

If a modeled comparison shows up to approximately 300% more projected retirement income, ask:

“What assumptions created that difference?”

What did each strategy cost?

What taxes were modeled?

What loan rate was used?

What crediting assumption was used?

What future JUMPs were assumed?

What retirement distributions were assumed?

How long did the projection run?

Show me exactly where the difference comes from.

What About Approximately 40% More Than a Traditional IUL?

In certain modeled comparisons we’ve evaluated, the JUMP Strategy has produced approximately 40% more projected retirement income than the traditional IUL structure being compared.

Again, don’t assume the difference comes from “lower fees.”

It can reflect multiple differences in the strategies being compared, including:

• Funding structure
• Loan mechanics
• Indexed-crediting assumptions
• Policy charges
• Death-benefit design
• Future JUMPs
• Retirement-distribution assumptions

The final number is the result.

The assumptions tell you whether you should trust it.

What Fees Matter Most?

There’s no single fee I would automatically label as the only one that matters.

The better question is:

“Which costs materially affect this policy’s ability to do the job I’m buying it to do?”

If your objective is death-benefit protection, one set of policy characteristics may matter most.

If your objective includes cash-value accumulation and retirement income, long-term policy efficiency and durability become especially important.

What Should You Ask Before Buying an IUL?

1. What premium-related charges apply?
2. What cost-of-insurance charges apply?
3. How can COI rates change as I get older?
4. What administrative or monthly charges apply?
5. What riders are included?
6. What does each rider cost?
7. What surrender charges apply?
8. How long does the surrender-charge period last?
9. What is my projected cash surrender value in the early years?
10. What policy-loan rate applies?
11. Can the loan rate change?
12. What is the contractual maximum loan rate?
13. How do loans affect policy values and death benefit?
14. What indexed-crediting terms affect the policy?
15. Which policy elements are guaranteed?
16. Which are nonguaranteed?
17. What do the total policy charges look like in actual dollars?
18. What happens to the policy if indexed crediting is lower than illustrated?
19. What happens if future JUMPs are not approved?
20. Does the retirement-income projection remain durable to age 95 or longer?

Then Ask for the Ugly Version

Most people are shown the version designed to make them excited.

I want to see the version that makes you uncomfortable too.

Lower the indexed-crediting assumption.

Run several weak crediting periods.

Use the current applicable 5% loan rate.

Then test the contractual maximum 6% loan rate.

Remove future JUMPs.

Extend longevity.

Test retirement distributions.

And keep the actual policy charges in the model.

Because Fees Become More Painful When the Projection Is Already Under Pressure

If policy performance is strong, costs can look manageable.

If policy performance comes in weaker while loans and retirement distributions are growing, the same costs can become more noticeable.

That’s why I care less about someone telling me:

“This fee is small.”

and more about:

“Does the policy still work when several things go wrong at the same time?”

This Is the Question a 58-Year-Old Is Really Asking

You’re probably not lying awake thinking:

“I wonder what the monthly administrative charge is.”

You’re thinking:

“Am I about to put money into something I don’t fully understand?”

Maybe you’ve spent 30 years building your retirement.

You don’t want to make one clever-looking move right before retirement and discover later that you missed something buried in the illustration.

“What if we mess this up and regret it?”

And You Don’t Want Your Kids Cleaning It Up Later

You want to understand the policy while you’re healthy, working, and making the decision yourself.

You don’t want to be 82 with a complicated policy, a large loan balance, and no idea what the charges are doing.

The thought underneath that is simple:

“I don’t want to ask my kids for help.”

“We should be able to handle this ourselves.”

That’s another reason transparency matters.

The Bottom Line

Yes, an IUL has costs.

Those can include premium-related charges, cost of insurance, administrative expenses, rider charges, surrender charges, and policy-loan costs.

Indexed-crediting provisions can also affect policy economics even when they aren’t traditional line-item fees.

But the question isn’t simply:

“Does this IUL have fees?”

Of course it does.

The useful question is:

“After every applicable cost is included, does this policy still accomplish what I’m buying it to accomplish?”

How We Evaluate IUL Fees at FPP Financial

At FPP Financial, we use our Retirement Math Method™.

I don’t want to tell you:

“The fees are low.”

That doesn’t prove anything.

Show the charges.

Show the policy values.

Show the surrender values.

Show the insurance costs.

Show the loan costs.

Show the Matching Indexed Participating Loan mechanics.

Show the current applicable 5% loan rate.

Stress-test the applicable contractual maximum 6% loan rate.

Show what happens if future JUMPs stop.

Show what happens when retirement distributions begin.

Then compare the projected retirement income against the alternatives you’re actually considering.

I don’t try to sell you on the strategy. I make the strategy prove itself with the math.

Want to See the Costs Before You Decide?

Good.

That’s exactly how this should work.

Don’t buy an IUL because someone says the fees are low.

Don’t reject one because someone online says the fees are high.

Run the actual policy.

Look at the actual costs.

Then make those costs compete against the projected benefit.

In certain modeled comparisons we’ve evaluated, the IUL JUMP Strategy has produced up to approximately 300% more projected retirement income than the 401(k), Traditional IRA, or comparable tax-deferred retirement strategy being evaluated.

But if we’re going to show you that number, we should also show you what it costs to produce it.

Don’t just believe the 300% number. Make the strategy prove where the difference comes from with the math.

The number isn’t the reason to buy it. The assumptions behind the number are what you need to understand.

Show me exactly where the difference comes from.

Let the math do the talking.

Schedule Your Tax-Free Retirement Strategy Meeting

Explore More

• How Do IUL Fees and Cost of Insurance Change as You Get Older?
• How to Read an IUL Illustration Before You Buy a Policy
• What Is the IUL JUMP Strategy and How Does It Work?

Disclosure

This material is for educational purposes only and is not intended as individualized investment, securities, tax, legal, underwriting, or insurance advice. Indexed universal life insurance is permanent life insurance and is not a qualified retirement plan, IRA, brokerage account, mutual fund, index fund, savings account, or direct investment in a market index.

Fees, expenses, and policy charges vary by insurance contract. Examples discussed in this article are general categories and do not represent a complete list of charges for every indexed universal life policy. The actual insurance contract and current approved policy materials govern the charges, guarantees, and provisions applicable to a specific policy.

Premium-related charges, cost-of-insurance charges, administrative charges, rider charges, surrender charges, and other expenses can vary by policy. Cost-of-insurance rates and actual dollar charges are not necessarily the same thing. Applicable COI calculations may involve attained age, underwriting classification, sex where permitted, applicable amount of insurance risk, death-benefit structure, and other contractual factors.

Cash value and cash surrender value can differ. Surrender charges and other contractual adjustments may reduce the amount available if a policy is surrendered during the applicable surrender-charge period. Policyholders should review current surrender values and contractual surrender provisions before terminating a policy.

Caps, participation rates, spreads, floors, and other indexed-crediting provisions are not necessarily line-item policy fees. They can, however, affect indexed-interest crediting and overall policy economics. Their application varies by contract and crediting strategy.

Indexed universal life insurance does not directly invest policy cash value in the S&P 500 or another market index and does not provide ownership of underlying index securities through the indexed account. Indexed-crediting results should not be confused with market-index returns or direct investment performance.

A 0% indexed-crediting floor applies to the applicable indexed-crediting calculation under examples discussed and does not guarantee that overall policy value cannot decline. Cost of insurance, administrative expenses, loan costs, withdrawals, and other policy mechanics can continue to affect policy values.

The historical 6.87% indexed-crediting example discussed in this article is based on an analysis of annual S&P 500 price changes from 2006 through 2020, excluding dividends, and applying the stated 10% cap and 0% indexed-crediting floor. Historical results do not predict future policy performance and should not be interpreted as a guaranteed future indexed-crediting rate, net policy return, or historical total return of the S&P 500.

The simplified 1.87-percentage-point modeled positive spread discussed in this article represents the mathematical difference between the 6.87% historical indexed-crediting result used in the referenced model and the current 5% applicable policy-loan rate. It is not a representation of net policy return after cost of insurance, administrative expenses, premium charges, rider charges, loan costs, surrender provisions, or other factors.

The modeled effective JUMP results of approximately 8.74%, 11.61%, 14.48%, and 17.35% are not S&P 500 returns, indexed-crediting rates, net returns after policy charges, participation rates, cap rates, or guaranteed policy returns. They are modeled effective results under assumptions used in the referenced JUMP analysis, before accounting for applicable policy charges and other factors.

Life insurance illustrations contain assumptions and may include both guaranteed and nonguaranteed elements. Nonguaranteed values, indexed-crediting assumptions, policy values, death benefits, and retirement-income projections are not promises of future results. Actual policy performance can differ materially from illustrated results.

Matching Indexed Participating Loans are policy loans. They are not free contributions, employer matches, bonuses, tax credits, guaranteed gains, or direct investments in a market index. Under the strategy described here, Matching Indexed Participating Loan proceeds are modeled as being redeployed into the same policy as additional funding. Associated policy indebtedness and applicable loan costs remain part of the policy economics.

Policy loans generally accrue applicable loan charges and can reduce policy values and death benefits and increase lapse risk. Outstanding policy indebtedness generally reduces the net death benefit payable under the insurance contract.

The JUMP Strategy is modeled with applicable loan charges carried forward during the accumulation design rather than requiring the client to pay those charges out of pocket each year. This does not eliminate the economic cost of borrowing, guarantee positive arbitrage, or guarantee that policy values will remain sufficient to support outstanding indebtedness.

With the policy structure discussed in this article, the applicable loan rate is currently 5%, with a contractual maximum loan rate of 6% for the applicable loan feature. The current applicable rate should not be interpreted as a guarantee that the rate will remain at 5%. Current and guaranteed loan provisions should be verified against current approved policy information and the actual insurance contract.

Positive arbitrage is not guaranteed. Periods in which indexed crediting is below the applicable loan cost can produce unfavorable loan economics. Policy charges and insurance costs remain relevant regardless of whether a particular period produces favorable or unfavorable modeled loan economics.

Future JUMPs and associated death-benefit increases are subject to future underwriting and approval. Initial policy approval and prior successful JUMPs do not guarantee future increases. Health, income, employment, existing insurance, driving history, occupation, hazardous job duties, risky hobbies, and other applicable underwriting factors may affect eligibility for additional coverage.

Under the strategy mechanics described, failure to qualify for a future JUMP does not necessarily mean prior successful JUMPs or the previously achieved matching-loan level automatically disappear. Actual policy rules govern each case, and retirement-income projections should be updated when future JUMP assumptions change.

Policy values from a properly structured and maintained non-MEC life insurance policy may potentially be accessed through withdrawals to basis and policy loans without current income taxation under current federal rules, subject to applicable requirements. Tax treatment can be affected by basis, MEC status, policy lapse, surrender, outstanding indebtedness, and other circumstances. A policy that lapses or is surrendered with gain and outstanding indebtedness may create taxable income.

The up-to-approximately-300% projected retirement-income result cited in this article refers to certain modeled comparisons involving the IUL JUMP Strategy and a 401(k), Traditional IRA, or comparable tax-deferred retirement strategy. It is not a universal result or guarantee and should not be interpreted as 300% more investment return, indexed interest, net policy return, or S&P 500 performance. Policy charges and applicable loan costs should be included in a meaningful policy projection. Results can change materially with contributions, employer contributions, market-return assumptions, taxes, investment expenses, indexed-crediting assumptions, insurance costs, policy charges, loan costs, future JUMPs, distribution timing, and longevity.

The approximately-40% projected retirement-income result refers to certain modeled comparisons involving the JUMP Strategy and the traditional IUL structure being evaluated. It is not a universal result or guarantee. Differences in policy charges, funding, indexed-crediting assumptions, loan mechanics, future JUMPs, death-benefit structure, and retirement distributions can materially alter the comparison.

Comparisons between an IUL and a 401(k), IRA, brokerage account, index fund, traditional IUL, or another retirement strategy should use clearly stated assumptions appropriate to each strategy. Different strategies have different costs, tax characteristics, contribution rules, market exposure, insurance features, and distribution mechanics.

Policy-specific guarantees, nonguaranteed elements, underwriting requirements, death-benefit options, MEC limits, cost-of-insurance provisions, premium charges, administrative charges, rider charges, surrender provisions, loan provisions, loan rates, caps, participation rates, spreads, crediting methods, lapse provisions, and distribution mechanics should be verified against current approved illustrations and the actual insurance contract.

FPP Financial does not provide tax or legal advice. Consult qualified tax, legal, and financial professionals regarding your individual circumstances before purchasing or modifying life insurance or implementing any retirement-income strategy discussed here.