a properly structured iul is a fantastic retirement savings vehicle but not all iuls are created equal any index product is all about the index how it performs and what it guarantees but there are other elements that are just as important before you sign for a policy go through your illustration and make note of the following because once the free look period is over which is typically seven to ten days after your policy is issued just depending on your state you're stuck in that iul for the duration of the surrender period which is at least 10 years unless you're willing to lose most if not all the money you put into the policy for the sake of Simplicity I will be using securian's balanced growth accumulator 2 with a three-year s p prison index and alliance's life Pro Advantage which is typically run with 50 percent Pimco and Bloomberg and index I created an iul comparison checklist in Excel which you can find in the video description down below the number one issue is whether or not the iul is structured properly for the maximum cash accumulation for you the lowest death benefit the IRS will allow and that is the lowest commission for the agent as you can see if you are contributing 500 a month your initial death benefit should be a hundred thousand dollars or just depending on your age and gender a little bit more eight hundred dollars a month would be around 134 000 initial death benefit and so forth and you can see it doesn't get up to a million dollars until you're putting in six thousand dollars a month the death benefit option should be increasing to level or option b to option A some agents will design it with a level death benefit for all years but that significantly raises the initial death benefit and then you pay fees on that increased death benefit you want to have the increasing death benefit option while you're contributing a premium even though it is a little bit more expensive than the level death benefit option but the level death benefit option limits how much of your premium dollars can go into the index so once you are not contributing a premium anymore we want to switch to level because it is less expensive if your policy has a level death benefit option you cannot switch from level to increasing only from increasing to level how long is the surrender period ten years is the norm but Alliance For example has a 13-year surrender period And I have seen surrender periods as much as 20 years you can find this on your illustration when you see the cash value and the surrender value the same for the first time when you purchase an iul you are signing a contract one of the things you are agreeing to is the length of the surrender period in the case of securian you would be agreeing to a 10-year surrender period so in year 10 the surrender value and the cash value are the same so you are agreeing to the fact that you understand that you are in this policy for 10 years and if you want to get out of your contract before that 10 years is up you understand you will pay a surrender charge the surrender value column is how much you would get back if you wanted to get out of your contract early it is also by the way how much you can borrow what is the maximum Illustrated rate this is a number that the National Association of insurance Commissioners comes up with and is the maximum interest rate at which the illustration can show your money growing this rate varies significantly with each carrier and index on your illustration if you cannot find anything that specifically mentions what the maximum Illustrated rate is you will find it in The Ledger under non-guaranteed values as an example securian's maximum Illustrated rate is only 5. 22 percent versus Alliance at 7. 08 percent and when you add the 0.
9 percent bonus Alliance is able to show your money growing at 7. 98 percent or 52. 87 percent higher than securian and an alliance illustration will also show a much higher income because of that in this case the alliance illustration is showing an income double that of securians maximum Illustrated rate is totally meaningless what matters is how the indexes actually perform securian's three-year s p prism index average annual return is 250 to 350 percent greater than the maximum Illustrated rate of 5.
22 percent whereas allianz's Pimco and Bloomberg indexes average annual returns are just 2. 63 to 13.
