While much of what was said in this post IS true, there are a couple of misunderstandings.
June 10, 2026 by Sheryl J. Moore
My friends know that I have the The White Coat Investor on my list of insurance companies that can’t get insurance quite right.
In this installment, Brandon Beaber advises on indexed universal life (IUL).
While much of what was said in this post IS true, there are a couple of misunderstandings.
THEY SAY: The credited interest rate in IUL policies does not consider stock dividends, a significant proportion of the total long-term return (about 30% historically). For instance, if the actual index returns 5% but 2% of this is dividends, you only get 3%. Thus, you will trail the market whenever the total return is >0%, about 75% of the time.
I SAY: This IS life insurance; not an investment. It is not intended to compete with investments. AND- the dividends cannot be credited to the policyholder’s IUL because their premiums are never invested IN the stock market. The insurance company cannot pass the dividends on, if they aren’t receiving the benefit of the dividends themselves.
THEY SAY: Unfortunately, fees & commissions are paid throughout the life of the product. Commissions can range from 1%-3% per year. Other ongoing costs include admin fees, premium loads (money taken out of each premium payment), index crediting fees, insurance costs (which rise with age), & a policy fee. There are also charges for specific riders, such as those that allow you to withdraw funds for a critical illness.
I SAY: Commissions are MUCH different than cited, but because of the proprietary nature of this information, I won’t address the facts publicly. The commissions are not typically paid throughout the life of the policy. Also- IUL is intended to be an “unbundled” type of life insurance that discloses all of the costs of the policy to the purchaser. As such, a mix of premium loads, policy fees, percent of fund charges, per 1,000 charges and cost of insurance charges apply. With whole life, for example, you have no idea how much of your premium is going towards the administration of your policy, much less the cost of insuring an individual. Universal life insurance products are intended to be more transparent (although admittedly, are often more complicated).
Ultimately, IUL IS life insurance. It is intended to provide a tax-free benefit to the family of the insured, upon death. It isn’t an investment, regardless of how it is being pitched.
These products ARE complicated. Insurance agents need to know HOW the products work, learn how to scrutinize illustrations, & ensure that they stick around to manage these products. Managing expectations is key with ANY type of universal life product, including IUL.
Oh, and they need to know when IUL actually makes sense for the purchaser.
My IULs have earned about 7% annually, over the past 27 years. Not too shabby for a non-variable UL product, if you ask me. -sjm
