Why a Missed IUL JUMP Doesn’t Necessarily Reset the Strategy

You successfully completed your first JUMP.

Then your second.

Maybe your third.

The Matching Indexed Participating Loan level has grown.

Then the next planned JUMP comes around and you don’t receive approval for the additional death benefit.

Your first thought may be:

“Did I just lose everything we built?”

Or:

“Do I have to go all the way back to the beginning?”

Under the JUMP mechanics we’re discussing, a missed JUMP does not necessarily mean the strategy automatically resets.

That’s one of the most important parts of the progression to understand.

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

Pause and Reset Are Two Very Different Things

Imagine you’re walking up a staircase.

You successfully reach the third step.

Then you’re unable to move to the fourth.

A reset would mean being sent all the way back to the floor.

A pause means remaining on the third step.

That’s the basic idea we’re talking about with a missed JUMP.

Let’s Put Real Numbers on It

Here’s the $10,000 annual client-contribution example we’ve been using:

The planned JUMPs in this example occur in:

Years 3, 5, 7, 9 and 11.

Not every year.

And not every third year.

Now Imagine You Successfully Reach Year 7

By the Year 7 JUMP, the example has reached:

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

Then Year 9 arrives.

The next planned JUMP would increase the Matching Indexed Participating Loan level from:

$30,000 to $40,000.

But the requested additional death benefit isn’t approved.

What happens?

It Does Not Necessarily Mean You Fall Back to $10,000

This is the misunderstanding I want to clear up.

Under the strategy mechanics we’re discussing, failing to complete the Year 9 JUMP does not automatically mean the matching-loan progression disappears.

You may remain at the previously achieved:

$30,000 Matching Indexed Participating Loan level.

With the client’s $10,000 contribution, that means the example can remain at:

$40,000 of total annual funding shown.

Instead of advancing to $50,000.

What Was Missed Was the Next Increase

That’s the distinction.

You didn’t necessarily lose the Year 3 JUMP.

You didn’t necessarily lose the Year 5 JUMP.

You didn’t necessarily lose the Year 7 JUMP.

You failed to advance to the next planned level.

That’s why I use the word:

Pause.

What Happens to the Previous Matching Indexed Participating Loans?

They don’t simply vanish.

The matching amounts created through prior successful JUMPs are policy loans.

They’re actual policy indebtedness.

A missed future JUMP doesn’t magically erase the loans that already exist.

And that’s important because some people hear:

“You stay at your old level.”

Then mentally translate that into:

“So the old loans disappear and we start fresh at that level.”

No.

That’s not what we’re describing.

The Loans Accumulate as the Strategy Progresses

When the strategy moves from a $10,000 matching-loan level to a $20,000 matching-loan level, the later loan activity does not simply pay off and replace the earlier loan.

Prior loan activity remains part of the outstanding policy indebtedness.

Later JUMPs add additional loan activity.

That’s why you need to look at the entire policy balance sheet, not just the annual funding column.

A Missed JUMP Does Not Erase the Debt Either

This is where the explanation needs to stay balanced.

The good news is that a missed JUMP does not necessarily mean losing the matching-loan level already achieved.

But that does not mean:

“Nothing matters because you keep all the benefits and the loans go away.”

The outstanding policy indebtedness still matters.

The applicable loan charges still matter.

Policy charges still matter.

Indexed crediting still matters.

Policy durability still matters.

Why Might Someone Miss the Next JUMP?

Each planned JUMP involves requesting additional death benefit.

That can require another underwriting decision.

A future approval can be affected by factors such as:

• Health
• Income
• Employment
• Existing insurance
• Driving history
• Occupation
• Hazardous job duties
• Risky hobbies or activities
• Other applicable underwriting factors

The fact that the original policy was approved does not guarantee every future death-benefit increase.

Why Does the Strategy Need More Death Benefit Anyway?

Because the JUMP Strategy is designed to increase the amount of funding going into the policy as the Matching Indexed Participating Loan level rises.

The planned death-benefit increases are used to create additional funding capacity while seeking to maintain the intended non-MEC structure.

The death benefit does not simply double according to an arbitrary schedule.

The increase is connected to the additional funding objective and policy design.

If the Death-Benefit Increase Doesn’t Happen, the Next Funding Increase Doesn’t Happen Either

This is where the pause becomes visible.

Suppose the next JUMP would have moved the strategy from:

$40,000 of total annual funding shown

to:

$50,000 of total annual funding shown.

If the additional death benefit needed for that planned step isn’t approved, you should not continue pretending the $50,000 funding level happened.

It didn’t.

Use the level actually achieved.

That Means the Retirement Projection Needs to Change

This is the part I care about most.

Don’t keep showing someone the original retirement-income projection after the assumptions behind it have changed.

If the original illustration assumed successful JUMPs in Years 3, 5, 7, 9 and 11, but the progression stopped after Year 7, rerun the numbers.

The new projection should reflect the actual progression.

Don’t Protect the Original Illustration

Protect the client.

If the retirement-income number gets smaller, show it.

If the projected policy value changes, show it.

If the outstanding loan balance changes, show it.

If policy durability changes, show it.

The purpose of the math isn’t to defend the sale.

The purpose of the math is to tell you what’s happening.

Could You Reapply for the Missed JUMP Later?

Under the strategy mechanics we’re discussing, you may potentially reapply at a later policy anniversary.

Maybe the issue that prevented the prior increase changes.

Maybe health improves.

Maybe income improves.

Maybe employment changes.

Maybe an occupational or financial underwriting issue changes.

Then another application can be evaluated.

But that future application still requires approval.

Reapplying is an opportunity for another underwriting decision. It isn’t a guarantee that the missed JUMP will eventually occur.

What Happens While You Wait?

Under the mechanics described here, the strategy can potentially continue at the matching-loan level already achieved rather than automatically returning to the original client-only funding level.

For example, if the $30,000 matching level had already been achieved:

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

That becomes the level you analyze while the progression is paused, subject to the actual contract and applicable procedures.

This Is Why “Missed JUMP” and “Failed Strategy” Are Not the Same Thing

A missed JUMP means the strategy did not advance according to the original planned schedule.

That’s important.

But it doesn’t automatically tell you whether the remaining strategy is good or bad.

You have to rerun it.

Maybe the level already achieved still produces a compelling projected outcome.

Maybe it doesn’t.

Maybe a later JUMP becomes possible.

Maybe it never does.

The math should tell you what the new path looks like.

Here’s Where the Loan Mechanics Matter

The Matching Indexed Participating Loan isn’t free money.

It isn’t an employer match.

It isn’t a tax credit.

It’s a policy loan.

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

That means the loan-funded value remains part of the applicable indexed-crediting strategy while carrying the applicable loan cost.

Think About the Policy in Two Buckets

Bucket One: the client’s own contribution.

In our example:

$10,000 per year.

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

Under the indexed strategy used in our example, both buckets have the same potential:

10% cap and 0% indexed-crediting floor.

The difference is that Bucket Two carries the applicable policy-loan cost.

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 a promise that the rate stays at 5% forever.

The contractual maximum for the applicable loan feature is 6% under the structure we’re discussing.

Neither figure guarantees favorable loan economics.

Why Does a Paused JUMP Still Have the Potential to Matter?

Because the loan-funded dollars already created through successful prior JUMPs remain part of the strategy.

Under the design we’re discussing, those redeployed loan proceeds can continue participating in the applicable indexed-crediting strategy.

But the loan cost continues to matter too.

So the right question isn’t:

“Do I still have the old JUMPs?”

The better question is:

“What do the policy values, outstanding loans and projected retirement income look like if I stay at this level?”

Here’s the Historical Crediting Example

One historical analysis used with this 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’s not the historical return of the S&P 500.

It’s not a guaranteed future IUL crediting rate.

And it’s not a guaranteed policy return.

Compare That With the Current 5% Loan Rate

Under those 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 the policy credits 0% while the loan costs 5%, the economics are unfavorable for that period.

Positive arbitrage is not guaranteed.

What Happens to the JUMP Math If the Progression Stops Early?

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’re not IUL indexed-crediting rates.

They’re not guaranteed policy returns.

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

If You Miss the Year 9 JUMP, Don’t Keep Using the Year 9 JUMP Result

This should be obvious once you see it written out.

If the progression stops at the Year 7 level, don’t keep presenting the model as though the Year 9 JUMP occurred.

The assumption changed.

So change the projection.

That’s the whole point of stress-testing.

Now the Up-to-300% Number Needs to Be Tested Again

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 modeled result.

It isn’t a guarantee.

It isn’t 300% more investment return.

And it doesn’t mean every client gets 300% more retirement income.

A Missed JUMP Can Change That Comparison

Imagine the original comparison assumes every planned JUMP occurs.

Then the actual strategy stops progressing after Year 7.

Would I keep quoting the original projected retirement-income difference without recalculating it?

No.

I’d rerun the comparison using the progression that actually occurred.

That’s the Question Behind the 300%

Ask:

“How many JUMPs were assumed in this comparison?”

Then:

“What does the retirement-income difference look like if I miss the next one?”

Then:

“What if I never qualify for another JUMP after that?”

Now you’re testing the number instead of buying the headline.

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 result isn’t guaranteed either.

If the JUMP progression changes, the comparison needs to change with it.

That’s especially true when successive Matching Indexed Participating Loans are a major part of the modeled difference.

The Most Useful Illustration May Be the One Where Something Goes Wrong

The perfect illustration is easy.

Every JUMP gets approved.

The crediting assumptions work.

The loan economics cooperate.

Retirement starts exactly when planned.

The client takes exactly the amount modeled.

Life is rarely that tidy.

Run the Strategy With a Missed JUMP Before You Ever Miss One

Suppose you’re starting today.

Run the full progression.

Then run a version where the strategy stops after the Year 5 JUMP.

Run another where it stops after Year 7.

Now compare:

• Projected policy value
• Projected outstanding policy indebtedness
• Projected retirement distributions
• Projected net death benefit
• Projected policy durability

That’s information worth having before the first premium is paid.

Then Stress-Test the Loan Rate

Use the current applicable 5% loan rate.

Then use the contractual 6% maximum.

What happens if the JUMP progression stops early and the loan cost rises?

Now you’re looking at two assumptions changing at the same time.

Then Lower the Indexed-Crediting Assumption

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

Use a lower assumption.

Combine lower crediting with the 6% maximum loan rate.

Then combine both with a missed future JUMP.

What happens?

That’s a real stress test.

And Run It Longer Than You Think You’ll Live

Look at age 90.

Look at age 95.

If the illustration supports it, look beyond that.

What happens to the loan balance?

What happens to policy value?

What happens to the net death benefit?

What happens to the projected retirement distributions?

You don’t want a strategy that only looks good if you die on schedule.

Why People Panic When a JUMP Is Missed

Because by that point, the strategy isn’t theoretical anymore.

You’ve been funding it for years.

You’ve watched the progression.

You’ve built your retirement expectations around it.

Then someone tells you:

“The next increase wasn’t approved.”

Your brain doesn’t hear:

“The next step is delayed.”

It hears:

“My retirement plan is falling apart.”

That’s Why You Need to Understand the Pause Mechanic Before It Happens

If you already know the strategy can potentially remain at the level previously achieved, the conversation changes.

Instead of:

“Did I lose everything?”

You can ask:

“What does the math look like from the level I’m at now?”

That’s a much better question.

The Emotional Part Gets Bigger as Retirement Gets Closer

At 35, a change in the plan feels annoying.

At 58, it can feel dangerous.

You start thinking about how many working years you have left.

You start thinking about your spouse.

You start thinking about the kids.

And underneath all of it is:

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

You Don’t Want Your Kids to Become the Backup Plan

That’s one reason durability matters so much.

You want the retirement strategy to survive imperfect circumstances.

Not just a perfect illustration.

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

“We should be able to handle this ourselves.”

If independence is the goal, you need to know what happens when a major assumption doesn’t go according to plan.

What a Missed JUMP Does Not Mean

It does not automatically mean:

• Your original policy disappears
• All prior successful JUMPs disappear
• All prior policy loans disappear
• You automatically return to the original matching level
• The strategy is automatically a failure
• You are guaranteed to qualify for the missed JUMP later

Each of those statements skips important mechanics.

What a Missed JUMP Does Mean

It means a planned future step did not occur.

That matters.

The additional death benefit wasn’t approved.

The next matching-loan increase didn’t occur.

The original projection needs to be revisited.

And the strategy should now be evaluated from the level actually achieved.

Could Staying at the Lower Level Still Work?

Potentially.

But I don’t want to tell you that from a paragraph on a website.

I want to run it.

Show the current policy values.

Show the outstanding indebtedness.

Show the achieved matching-loan level.

Show the current loan rate.

Show lower crediting.

Show the retirement-income projection.

Then decide whether the remaining strategy still earns its place in the plan.

Don’t Force the Strategy to Reach the Original Illustration

This is another mistake I would avoid.

If a JUMP isn’t approved, don’t start making unrelated financial decisions just to recreate the original projection at all costs.

The illustration isn’t the goal.

Your retirement is the goal.

If circumstances change, update the strategy.

The Original Projection Is a Map, Not a Promise

A good projection tells you where you’re trying to go and what assumptions are being used to get there.

Then real life starts happening.

Underwriting changes.

Crediting changes.

Loan rates can change within contractual limits.

Income changes.

Retirement dates change.

The projection should move with reality.

So, Does a Missed IUL JUMP Reset the Strategy?

Not necessarily.

Under the JUMP mechanics we’re discussing, a missed future JUMP can pause the progression at the matching-loan level already achieved rather than automatically resetting the strategy to the beginning.

If you had already reached a $30,000 Matching Indexed Participating Loan level, failing to qualify for the next $40,000 level does not automatically mean returning to zero matching-loan funding.

The previously achieved level can potentially continue, subject to the actual policy contract and applicable procedures.

But the Projection Must Be Updated

This is just as important as the pause mechanic.

Don’t say:

“Nothing changed.”

Something did change.

You didn’t get the next JUMP.

The future funding progression is now different from the original plan.

So rerun the retirement math.

How We Look at This at FPP Financial

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

If you miss a JUMP, I’m not interested in pretending the original projection still applies.

We’ll identify the matching-loan level you actually achieved.

We’ll identify the outstanding policy indebtedness.

We’ll show what happens if the progression stays paused.

We’ll look at what happens if a later JUMP is eventually approved.

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

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

We’ll lower the indexed-crediting assumption.

We’ll run the policy through a longer retirement.

Then we’ll compare the updated 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 What Your Retirement Math Looks Like If a Future JUMP Is Missed?

We’ll model both paths.

First, the planned progression with successful future JUMPs.

Then the progression stopping at an earlier level.

You’ll see the client-funded dollars.

You’ll see the Matching Indexed Participating Loan dollars.

You’ll see the outstanding policy indebtedness.

You’ll see the projected retirement distributions.

You’ll see what happens at the current 5% applicable loan rate.

You’ll see what happens at the contractual 6% maximum.

And you’ll see what happens under lower crediting assumptions.

In certain modeled comparisons, 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 that comparison assumes future JUMPs, I want to know what happens when one doesn’t occur.

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

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

Show me exactly where the difference comes from.

Let the math do the talking.

Schedule Your Tax-Free Retirement Strategy Meeting

Explore More

• What Happens If You Don’t Qualify for Your Next IUL JUMP?
• Why Do Future IUL JUMPs Require New Underwriting?
• Why Does the IUL JUMP Strategy Increase the Death Benefit Over Time?

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.

The description of a missed JUMP pausing rather than automatically resetting the strategy reflects the JUMP mechanics discussed in this article. Actual treatment of an individual policy, existing matching-loan levels, future loan activity, premium capacity, death-benefit changes and future applications is governed by the actual insurance contract, applicable procedures, underwriting decisions and policy circumstances. Policy-specific treatment should be confirmed using current approved policy information and the actual contract.

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

A policy owner may potentially be able to apply for additional coverage at a later policy anniversary if circumstances change. Any future application remains subject to applicable underwriting requirements and approval. Reapplication does not guarantee 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. A death-benefit increase does not by itself guarantee that a policy will avoid Modified Endowment Contract status. MEC testing is affected by actual policy design, premium activity, benefit changes, applicable tax rules and other factors.

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.

Prior policy loans do not automatically disappear because a future JUMP is missed, 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.

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 rate should be verified against current approved policy information. The 6% contractual maximum does not guarantee positive arbitrage or favorable policy performance.

Indexed universal life insurance does not directly invest in the S&P 500 or another 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 applies to the applicable indexed-crediting calculation under the example discussed and does not guarantee that overall policy value cannot decline. Policy charges, cost of insurance, loan costs, withdrawals and other policy mechanics continue to apply.

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 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 a modeled comparison assumes successful future JUMPs, those future underwriting approvals and funding increases are assumptions within the projection. A missed JUMP can materially change the projected retirement-income comparison and should be reflected in an updated analysis.

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. A missed JUMP, different loan costs, different policy charges, different crediting assumptions or other changes 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.

Illustrations are not guarantees of future performance. If actual JUMP progression, underwriting results, loan rates, policy charges, indexed crediting, distribution timing or other assumptions differ from an original illustration, updated policy projections should be reviewed.

Policy-specific guarantees, nonguaranteed elements, underwriting requirements, death-benefit options, MEC limits, loan provisions, loan rates, caps, participation rates, spreads, crediting methods, policy charges, surrender provisions, 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.