Can Your Job or Risky Hobbies Affect IUL Approval and Future JUMPs?

You’re healthy.

Your income supports the amount of life insurance you’re requesting.

You don’t smoke.

Your medical history looks good.

So you assume the IUL approval should be easy.

Then the underwriter starts asking questions about something that has nothing to do with your doctor’s office.

What do you do for work?

What are your actual job duties?

Do you fly?

Do you race?

Do you scuba dive?

Do you climb?

Do you participate in other higher-risk activities?

And you’re thinking:

“What does any of this have to do with my retirement strategy?”

Quite a bit if the retirement strategy is built around life insurance.

An IUL Is Still Life Insurance

This sounds obvious, but it’s easy to forget when the entire conversation is about cash value and retirement income.

Indexed universal life insurance isn’t simply a retirement account with a life insurance label attached to it.

The insurance company is taking on mortality risk.

So underwriting can look at more than your cholesterol, blood pressure and income.

Your occupation and certain recreational activities can potentially matter too.

Why Would Your Job Affect Life Insurance Underwriting?

Because two people can have the same age, income and medical history while facing very different risks during the workday.

Compare someone who works behind a desk with someone whose job regularly involves hazardous environments or dangerous duties.

The insurance risk isn’t necessarily identical.

That’s why occupational underwriting can look beyond the name of your job.

The actual duties can matter.

Your Job Title Doesn’t Always Tell the Whole Story

Imagine two people both write “engineer” on an application.

One spends nearly every day in an office.

The other regularly works in hazardous field environments.

Same broad profession.

Very different day-to-day exposure.

Or two people both own construction companies.

One manages employees, contracts and finances from an office.

The other still performs hazardous work personally.

The job title alone doesn’t explain the risk.

What Kinds of Occupational Factors Can Matter?

Actual underwriting is controlled by the insurance company, but occupational review can potentially consider things such as:

• The type of work you perform
• Your actual job duties
• How often you perform hazardous duties
• Work at heights
• Work involving dangerous machinery or environments
• Professional or occupational aviation exposure
• Other job-related hazards
• Changes in occupation since a prior application

The presence of a higher-risk occupation does not automatically tell you what the underwriting decision will be.

It means the activity may need to be evaluated.

Risky Hobbies Can Matter for the Same Reason

Your job may be completely ordinary.

But what you do Saturday morning can create another underwriting question.

Higher-risk recreational activities can potentially include things such as:

• Private aviation
• Certain forms of auto or motorcycle racing
• Scuba diving
• Rock or mountain climbing
• Skydiving
• Certain high-risk outdoor activities
• Other hazardous recreational activities

The exact activity isn’t the only issue.

The circumstances surrounding it can matter too.

“I Went Scuba Diving Once” Is Not the Same as “I Dive Constantly”

This is why you shouldn’t diagnose your own underwriting outcome from a list on the internet.

Frequency can matter.

Experience can matter.

The nature of the activity can matter.

Where and how the activity is performed can matter.

Training or certification may be relevant to the underwriting review.

The insurance company evaluates the actual facts under its applicable guidelines.

And This Matters Before You Buy the Original IUL

If you’re applying for an IUL today, occupation and avocational information may be part of the original underwriting process.

That can affect whether coverage is approved and the terms under which coverage may be offered.

But the IUL JUMP Strategy creates a second issue that can be even easier to overlook.

Your future JUMPs can require new underwriting.

That Means Your Life Can Change Between JUMPs

Maybe you work an office job when the original policy is issued.

Five years later, you’ve changed careers.

Or maybe your occupation didn’t change at all.

But you bought an airplane and started flying.

Or you started racing.

Or you took up another activity that creates a new underwriting consideration.

The original policy may have been issued years earlier.

But the next JUMP involves a new request for additional death benefit.

That can mean another underwriting review.

Here’s Why the Future JUMP Matters

Using our common $10,000 annual contribution example, the planned progression looks like this:

The client’s planned out-of-pocket contribution remains:

$10,000 per year.

At the Year 11 level shown in this example:

$10,000 is the client contribution.

$50,000 is the Matching Indexed Participating Loan.

That produces $60,000 of total annual funding shown.

The Matching Amount Is a Policy Loan

This can’t be skipped.

The matching amount isn’t free money.

It isn’t a carrier gift.

It isn’t an employer match.

It isn’t a tax credit.

It is an actual policy loan.

Under the JUMP design, the loan proceeds are redeployed into the same policy as additional funding.

The loan-funded dollars remain part of the policy’s applicable indexed-crediting strategy while also carrying the applicable loan cost.

What Does Any of This Have to Do With Your Job?

The JUMP progression requires planned increases in death benefit to create additional funding capacity under the intended policy design while seeking to maintain the intended non-MEC structure.

More death benefit means requesting additional life insurance coverage.

Additional coverage can require underwriting.

Underwriting can include occupation and avocational risk.

That’s the connection.

Imagine Your Career Changes Before Year 7

Suppose your Year 3 and Year 5 JUMPs were approved.

You’ve reached:

$10,000 client contribution + $20,000 Matching Indexed Participating Loan = $30,000 total annual funding shown.

Then you change careers before the planned Year 7 JUMP.

Your new job has materially different risk characteristics.

Now you’re requesting the additional death benefit associated with the next planned JUMP.

The new occupational information can potentially be part of that underwriting decision.

Or Imagine You Start a Risky Hobby

Maybe nothing changed professionally.

Your income is strong.

Your health is excellent.

But since your last underwriting decision, you’ve started participating regularly in a higher-risk activity.

That can potentially become relevant when additional life insurance is requested.

The original policy approval does not mean every future increase has already been approved.

Does Starting a Risky Hobby Automatically Cancel Your Existing IUL?

You should not assume that.

Your existing policy is governed by its actual contract.

A later lifestyle or occupational change and a new application for additional coverage are separate issues.

The important JUMP question is whether the new circumstances affect approval for the additional death benefit being requested.

Review the actual policy contract and applicable carrier procedures for your individual situation.

This Is Why You Need to Separate Existing Coverage From Future Coverage

People tend to blend them together.

They think:

“If my next JUMP isn’t approved, something must happen to all the insurance I already own.”

That’s not the right assumption.

The existing policy and a future request for additional insurance need to be evaluated separately under the applicable contract and underwriting rules.

What If Your Job or Hobby Prevents the Next JUMP?

Under the JUMP mechanics we’ve been discussing, you do not automatically lose the successful progression already achieved simply because the next planned JUMP isn’t approved.

A missed JUMP can pause the progression rather than automatically resetting the strategy.

Suppose you previously reached the $20,000 Matching Indexed Participating Loan level.

The next JUMP would have increased that level to $30,000.

But the additional coverage isn’t approved.

Under the mechanics described here, you may remain at the already-achieved $20,000 matching-loan level, subject to the actual policy contract and applicable carrier procedures.

You Don’t Automatically Fall Back to Zero

That’s the key distinction.

Your progression may look like:

$10,000 client contribution + $20,000 Matching Indexed Participating Loan = $30,000 total annual funding shown.

Instead of advancing to:

$10,000 client contribution + $30,000 Matching Indexed Participating Loan = $40,000 total annual funding shown.

The next step didn’t happen.

The prior successful steps don’t automatically vanish under the mechanics we’re discussing.

Can You Reapply Later?

Under the strategy mechanics we’re discussing, you may potentially reapply at a later policy anniversary if the circumstances affecting the earlier underwriting decision change.

Maybe your occupation changes.

Maybe you stop participating in a particular activity.

Maybe another underwriting consideration changes.

A later application is still subject to the underwriting requirements and approval standards applicable at that time.

A future application is an opportunity for another underwriting decision, not a guarantee.

Don’t Change Your Life Just to Chase a JUMP

This should be obvious, but it’s worth saying.

Your life insurance strategy should fit your life.

Your life shouldn’t be built around satisfying an illustration.

If you love flying, climbing, diving or another activity, the question isn’t:

“How do I hide this so I get approved?”

The application should be accurate.

The question is:

“How does this affect the underwriting and what does the retirement plan look like if the next JUMP isn’t approved?”

Never Hide a Hazardous Activity on an Insurance Application

Give accurate and complete information when requested during underwriting.

The goal isn’t to trick an insurance company into approving a projection.

The goal is to know what coverage can actually be approved based on the facts.

If the retirement strategy only looks attractive after important underwriting information is hidden, that’s not a strategy I’d want to rely on.

What Happens to the Loans Already in the Policy?

They remain part of the policy economics.

The Matching Indexed Participating Loans created during prior successful JUMPs are actual policy indebtedness.

A future occupational or avocational underwriting issue doesn’t magically erase those loans.

Policy charges still matter.

Loan costs still matter.

Crediting still matters.

Policy durability still matters.

The Current Applicable Loan Rate Is 5%

With the policy structure we currently use for the IUL JUMP Strategy, the applicable loan rate is currently 5%, with a contractual maximum loan rate of 6% for the applicable loan feature.

The current 5% rate isn’t the same thing as saying the rate can never change.

The contractual maximum is 6% for the applicable loan feature.

Neither number guarantees positive loan arbitrage.

The Two Buckets Help Explain the Strategy

Think about the policy in two conceptual buckets.

Bucket One: the money you’re contributing.

In our example, that’s $10,000 per year.

Bucket Two: the accumulated Matching Indexed Participating Loan money that’s being redeployed into the same policy.

Under the indexed strategy used in our example, both buckets have the same potential 10% cap and 0% indexed-crediting floor.

But Bucket Two carries the applicable policy-loan cost.

Where Does the Positive-Arbitrage Idea Come From?

One historical analysis used with the strategy examined annual S&P 500 price changes from 2006 through 2020.

Dividends were excluded because the policy isn’t directly invested in the S&P 500.

The analysis applied a 10% cap and 0% indexed-crediting floor to the annual price changes.

Negative annual price changes were treated as 0% for purposes of the indexed-crediting calculation.

Positive annual changes above 10% were capped at 10%.

Under those assumptions, the period produced a:

6.87% historical average indexed-crediting result.

That is not the historical return of the S&P 500.

It is not a guaranteed future IUL crediting rate.

And it is not a guaranteed policy return.

Compare the 6.87% Example With the Current 5% Loan Rate

Under those particular assumptions:

6.87% – 5.00% = 1.87 percentage points.

That’s the modeled positive spread.

If applicable indexed crediting exceeds the applicable loan cost, the loan-funded portion can experience favorable economics under the model.

If indexed crediting is 0% while the applicable loan cost is 5%, the economics are unfavorable for that period.

Positive arbitrage isn’t guaranteed.

Why Does Missing a JUMP Matter to That Math?

Because successive JUMPs can increase the amount of loan-funded dollars participating in the policy.

Under assumptions used in one JUMP analysis, the combination of the base indexed-crediting assumption and the 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 S&P 500 returns.

They are not IUL indexed-crediting rates.

They are not guaranteed policy returns.

They are modeled effective results under the assumptions used in that analysis, before accounting for applicable policy charges and other factors.

If Your Occupation Stops the Progression, Rerun the Projection

Suppose your original illustration assumed JUMPs in Years 3, 5, 7, 9 and 11.

You successfully complete Years 3 and 5.

Then your occupational circumstances change and the next requested death-benefit increase isn’t approved.

You should not continue using a retirement projection that assumes Years 7, 9 and 11 all occurred.

They didn’t.

Run the policy from the level actually achieved.

Do the Same Thing If a Hobby Changes Your Future Approval

The cause doesn’t change the basic planning principle.

If the future JUMP progression changes, the projection changes.

Don’t protect the old retirement-income number.

Update it.

What About Up to Approximately 300% More Projected Retirement Income?

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 a huge modeled difference.

But don’t stop at the percentage.

Ask:

“How many future JUMPs were assumed?”

Then:

“What happens to this retirement-income comparison if my occupation or activities prevent one or more future JUMPs?”

Now you’re actually testing the strategy.

The 300% Number Doesn’t Override Underwriting

A large projected retirement-income advantage doesn’t somehow guarantee the future life insurance approvals needed to create the projection.

If future JUMPs are built into the model, those approvals are assumptions.

If the assumptions change, rerun the model.

Maybe the projected advantage remains substantial.

Maybe it shrinks.

Maybe it changes the decision entirely.

The 300% isn’t the sales pitch. It’s the question.

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.

That modeled difference is tied to the strategy design and assumptions.

If future JUMP progression changes because additional coverage isn’t approved, the comparison needs to be updated.

The 40% result isn’t guaranteed either.

Here’s the Stress Test I Would Run

Start with the original projection.

Assume all planned JUMPs occur.

Then run a second version where the progression stops at the level you’ve already achieved.

Then run a third version where the next JUMP is delayed.

Compare the projected retirement income.

Now make the assumptions tougher.

Stress-Test the Loan Rate Too

Run the current applicable 5% loan rate.

Then run the contractual 6% maximum.

Now combine the 6% loan rate with no additional JUMPs.

What happens to the projected retirement income?

What happens to the loan balance?

What happens to policy durability?

Then Lower the Indexed-Crediting Assumption

Don’t assume the historical 6.87% indexed-crediting example repeats forever.

Run lower crediting.

Run lower crediting with the 6% maximum loan rate.

Then combine both with fewer successful JUMPs.

If the strategy still produces an outcome you’re comfortable with, that’s useful.

If it falls apart, that’s useful too.

I’d rather know before retirement.

What Should You Tell Your Advisor Before Applying?

Tell them what you actually do.

Not just your job title.

If your occupation includes unusual hazards, say so.

If you participate in activities that may be relevant to life insurance underwriting, say so.

The goal is to design around reality.

Not to build an illustration first and discover the underwriting problem later.

What If You’re Considering a Career Change?

If you already own a JUMP strategy and know another planned JUMP is coming, a significant occupational change may be worth discussing as part of the policy review.

That doesn’t mean you should choose your career based on life insurance.

It means the retirement projection should reflect the life you’re actually living.

What If You Take Up Flying or Another Higher-Risk Activity?

The same principle applies.

Don’t automatically assume it ruins the strategy.

Don’t automatically assume it doesn’t matter.

If future additional coverage is being requested, let the actual underwriting process determine how the new activity is treated.

Then update the retirement projection if the JUMP progression changes.

There’s a Bigger Planning Lesson Here

A 30-year retirement projection can make your life look strangely predictable.

Same income trajectory.

Same health.

Same career.

Same lifestyle.

Every JUMP approved.

Every assumption clicking into place exactly when the spreadsheet expects it.

Real life doesn’t behave like that.

You Might Change More Than Your Portfolio

You might start a business.

You might leave a business.

You might change careers.

You might retire early.

You might discover a hobby you love.

Your health may change.

Your income may change.

The retirement strategy needs enough flexibility to deal with the person you become, not just the person who signed the application in Year 1.

This Is Where the Fear Usually Shows Up

You’re 55.

The strategy has been working for years.

You’ve already achieved several JUMPs.

Then something in your life changes.

Suddenly you’re thinking:

“Did I just mess up the retirement plan because I changed jobs?”

Or:

“What happens if they don’t approve me because I started doing this?”

Then comes the bigger thought:

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

You Don’t Want a Retirement Plan That Requires You to Live in a Bubble

You want to live.

You want choices.

You want independence.

And if something changes, you want to know the strategy has another path.

You don’t want one missed future approval turning your children into the backup retirement plan.

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

“We should be able to handle this ourselves.”

That’s why we don’t model only the perfect path.

So, Can Your Job or Risky Hobbies Affect IUL Approval?

Yes. Occupation, hazardous job duties and certain higher-risk recreational activities can potentially affect life insurance underwriting.

The exact effect is determined by the actual activity, circumstances, underwriting guidelines and other factors in the application.

It does not mean everyone with a dangerous occupation or risky hobby will receive the same underwriting decision.

And it doesn’t mean you should assume an outcome before the case is actually reviewed.

With the IUL JUMP Strategy, Future Changes Can Matter Too

Future JUMPs can require additional death-benefit approval.

So an occupation or activity that changes after the original policy is issued may become relevant when you later request additional coverage.

If the next JUMP isn’t approved, the progression can pause rather than automatically resetting under the strategy mechanics described here.

Then the retirement projection needs to be updated using the JUMP level actually achieved.

How We Look at This at FPP Financial

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

I don’t want to build a retirement projection around the assumption that your life will remain exactly the same for the next 20 years.

If future JUMPs are part of the strategy, we’ll identify them.

We’ll explain that future death-benefit increases require future approval.

We’ll look at what happens if the progression pauses.

We’ll account for the Matching Indexed Participating Loan balance.

We’ll model the current 5% applicable loan rate.

We’ll stress-test the contractual 6% maximum.

We’ll lower the indexed-crediting assumption.

We’ll run a scenario with fewer future JUMPs.

Then we’ll compare the projected retirement income.

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

Want to See What Happens If Your Future JUMP Progression Changes?

Don’t evaluate the IUL JUMP Strategy using only the perfect illustration.

Let’s look at the original JUMP schedule.

Then let’s model what happens if your circumstances change.

We’ll look at the level you’ve already achieved.

We’ll identify the future increases that still require underwriting.

We’ll account for existing policy indebtedness.

We’ll test fewer future JUMPs.

We’ll test the current 5% applicable loan rate and contractual 6% maximum.

We’ll lower the indexed-crediting assumptions.

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

If the strategy still produces a compelling result, you’ll see it.

If the projected advantage relies heavily on every future underwriting decision going perfectly, you’ll see that too.

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.

Let the math do the talking.

Schedule Your Tax-Free Retirement Strategy Meeting

Explore More

• Why Do Future IUL JUMPs Require New Underwriting?
• Can Your Income Limit How Much IUL Life Insurance You Can Buy?
• What Happens to Your IUL JUMP Strategy If Your Health Changes?

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 or direct investment in a market index.

Life insurance coverage is subject to underwriting and carrier approval. Occupation, actual job duties, hazardous occupational exposures, aviation, recreational activities and other avocational factors may be considered under applicable underwriting guidelines. The existence of a particular occupation or activity does not by itself determine the underwriting outcome. Actual requirements, classifications, exclusions where applicable, pricing and approval decisions are controlled by the insurance company.

Applicants should provide accurate and complete information requested during underwriting. Material application and underwriting requirements are governed by applicable law, carrier procedures and policy provisions.

Future JUMPs and associated death-benefit increases are subject to future carrier approval and applicable underwriting requirements. Future approval is not guaranteed by initial policy approval. Changes in occupation, job duties, recreational activities, health, income, employment, existing insurance and other underwriting factors may affect eligibility for additional coverage.

Under the strategy mechanics described in this article, failure to obtain approval for the next planned JUMP may pause future progression rather than automatically eliminating prior successful JUMPs or returning the strategy to its original matching-loan level. Actual treatment of an individual policy is governed by the insurance contract, applicable carrier procedures, underwriting decisions and the circumstances of the policy at that time.

A policy owner may potentially be able to apply for additional coverage at a later policy anniversary if occupational, avocational or other circumstances change. A later application remains subject to applicable underwriting requirements and approval. A change or discontinuation of an occupation or activity does not guarantee future approval.

Planned death-benefit increases under the JUMP Strategy are intended to create additional policy funding capacity while seeking to maintain the intended non-MEC structure. Increasing a death benefit does not by itself guarantee that a policy will avoid Modified Endowment Contract status. Actual premium timing, policy structure, death benefit, applicable tax rules, policy changes and other factors must be considered.

Matching Indexed Participating Loans are policy loans. They are not free carrier contributions, employer contributions, bonuses, tax credits, guaranteed gains or direct investments in a market index. Under the JUMP 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.

Existing policy indebtedness associated with prior loan activity does not automatically disappear because a future JUMP is delayed or not approved. 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.

Indexed universal life insurance does not directly invest in a market index, does not own the underlying index securities and does not receive index dividends. Indexed interest is determined according to applicable policy crediting terms, which may include caps, participation rates, spreads and other provisions.

A 0% indexed-crediting floor does not guarantee that overall policy value cannot decline. Policy charges, cost of insurance, loan costs, withdrawals and other policy mechanics continue to apply. Caps, participation rates, spreads, loan rates and other nonguaranteed elements may change when permitted by the insurance contract.

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, Modified Endowment Contract status, policy lapse, surrender and other circumstances. A policy that lapses or is surrendered with gain and outstanding indebtedness may create taxable income.

References to the $10,000 annual contribution example, JUMP progression, 6.87% historical indexed-crediting example, 1.87 percentage-point modeled positive spread, modeled effective results of 8.74%, 11.61%, 14.48% and 17.35%, current 5% loan rate, contractual maximum 6% loan rate, approximately 40% more projected retirement income, or up to approximately 300% more projected retirement income are illustrative and are not guarantees of future policy performance, positive arbitrage, policy durability, funding capacity, non-MEC status, future JUMP approval, death benefit or retirement 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. When the modeled comparison assumes successful future JUMPs, future underwriting approvals are assumptions within the projection. Occupational or avocational changes that affect future approval can materially change the projected result.

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. Changes to future JUMP progression can materially alter the modeled comparison.

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. The modeled effective JUMP results discussed above are not S&P 500 returns, indexed-crediting rates or guaranteed policy returns.

Positive arbitrage is not guaranteed. Periods in which indexed crediting is below the applicable loan cost can produce unfavorable loan economics. Policy charges and other expenses must also be considered when evaluating overall policy performance.

A change in occupation or recreational activity, missed JUMP or delayed JUMP can materially change projected funding, policy values, indebtedness, death benefits and retirement-income results. Illustrations should be updated as actual policy performance, underwriting results and other assumptions change.

Policy-specific guarantees, nonguaranteed elements, underwriting requirements, loan provisions, loan rates, caps, participation rates, spreads, crediting methods, expenses, surrender provisions, MEC testing, lapse provisions and death-benefit provisions should be verified against current carrier-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 life insurance or implementing any retirement-income strategy discussed here.