IUL Costs and Risks: Questions to Ask Before Buying

Ask where each payment goes

Request a breakdown of premium charges, administrative fees, cost of insurance, and any rider or indexed-account charges. Ask which costs are guaranteed and which can change within the contract.

A planned premium is not a promise that the policy will remain funded for life. Ask what additional payments might be needed if results are less favorable than illustrated.

Understand interest-crediting limits

An index is used to calculate interest under the policy terms; you do not own the stocks in that index. A cap, participation rate or spread can limit the credit. The available methods and guarantees vary by policy.

A floor applies to the indexed interest calculation. Insurance costs and other charges still apply. Ask how the policy behaves during several years of low credited interest.

Check access to cash value

Find the surrender-charge schedule and compare account value with cash surrender value. They may be different, especially early in the policy.

Loans can accrue interest and reduce benefits. Withdrawals or borrowing can weaken policy funding, and lapse or surrender may have tax consequences. Review the contract and speak with a tax professional about your circumstances.

Sources and further reading

• Pacific Life: indexed universal life overview
• Nationwide: what to know before purchasing IUL

Carrier sources explain product mechanics; linking to them does not imply an agency appointment or product availability.

Talk through your options

Tell me what you want your coverage to accomplish. We can discuss the costs, risks and alternatives in the context of your needs and budget.

General information only. Policy terms, funding requirements and availability vary. Approval and projected values are not guaranteed.