Welcome to the comprehensive guide on selling indexed universal life insurance (IUL). We have dedicated significant time and effort to gather the essential components that will assist you in gaining a better understanding of how to effectively sell indexed universal life insurance.
This guide caters to two specific categories of agents:
- Agents who are aware of IULs but haven’t fully capitalized on the potential they offer.
- Agents who are currently selling IULs and are seeking additional support, along with innovative ideas that can provide them with a competitive edge over their rivals.
Getting Started with IULs
Indexed universal life insurance has become a prominent subject in today’s discussions, garnering attention from various renowned sources such as Fox Business, Forbes, and Investopedia, among others.
This increased interest can be attributed to the fact that indexed universal life policies often offer higher potential returns compared to other forms of permanent life insurance, particularly in specific situations where they are effectively utilized.
Indexed universal life policies have:
- Indexed universal life insurance offers the potential for higher returns compared to whole life insurance and universal life insurance. This is accomplished by utilizing call options to capture upward market growth while implementing floors to limit potential losses.
- One of the key advantages of indexed universal life insurance is its remarkable flexibility. Policyholders have the freedom to customize their policies according to their unique circumstances, allowing them to build a policy that aligns perfectly with their specific needs and goals.
- Unlike taxable investments, cash accumulation within an indexed universal life insurance policy remains tax-deferred as long as the funds remain within the policy. Additionally, policy loans can be utilized to generate tax-free retirement income, providing an additional benefit for policyholders.
I would like to pose a couple of questions to you:
If you are currently not involved in selling indexed universal life insurance (IULs), what are the reasons behind this decision?
If you are an experienced agent, do you feel confident that you are effectively selling IULs in the optimal manner?
Considering the significant potential for growth and benefits associated with indexed universal life insurance, why do you think not all agents choose to offer this type of insurance?
That’s a fantastic point, and the answer becomes clear.
The internet is brimming with a plethora of advice on insurance and investment matters, encompassing topics ranging from alternatives to 401(k) plans to the pitfalls of investment scams. However, there has been a noticeable absence of a comprehensive resource providing a holistic overview of indexed universal life insurance policies, until now.
Through extensive research, training, and education, we have meticulously curated this guide to equip you with a profound understanding of selling indexed universal life insurance. Whether you possess a limited knowledge of IULs or are already well-versed in the subject, we will begin by covering the fundamentals before delving into the specifics that will enable you to effectively sell IULs with confidence and finesse.
How to Sell Indexed Universal Life Insurance (IULs)
The process of selling Indexed Universal Life Insurance follows a straightforward approach:
- Determine whether you want to operate as a captive agent, affiliated with a specific insurance company, or as an independent agent with the freedom to work with multiple carriers.
- Find the most suitable IUL agent or Brokerage General Agency (BGA) that can provide the necessary support for your business. Collaborating with the right partner can greatly enhance your success.
- Conduct a thorough analysis of your target market and develop a well-defined marketing plan. Understanding your audience and their needs will enable you to effectively reach and engage potential clients.
- Establish contracts with insurance companies that align with your business objectives. Choose insurers that possess the necessary resources, robust product offerings, and streamlined processes that can best support your selling efforts. Consider the top Indexed Universal Life insurance companies that cater specifically to your target audience.
- Initiate prospecting activities and invest in acquiring leads. Prospecting helps you identify potential clients who may be interested in purchasing Indexed Universal Life Insurance policies.
- Present the three common options to potential clients: Guaranteed Universal Life (GUL), Indexed Universal Life (IUL), and Guaranteed Indexed Universal Life (GIUL). Illustrate the benefits and features of each option to highlight the value they offer.
- Successfully close your first sale and experience the satisfaction of earning your first commission. This rewarding aspect of the process often brings great excitement and motivation.
Best IUL Companies in 2023
|Global Atlantic||Lincoln Financial Group Life Insurance|
|AIG Partners Group||Allianz Life Insurance Company|
|National Life Group||North American|
Insurance agents frequently inquire about the earning potential of selling Indexed Universal Life Insurance (IULs). Let’s take a closer look at the financial aspects.
When reviewing your illustrations, locate the pages that display the target premium, typically identified as “TP.”
Once you have identified the target premium from your illustrations, you can multiply that amount by your commission percentage, as well as the advance percentage if you have opted for annualized commission.
For instance, suppose the target premium of a policy is $1000 and your commission rate is 85%. In that case, your total commission would amount to $850.
If you are under an advanced commission contract, you would then multiply the $850 by either 0.5 or 0.75, resulting in a 6 or 9-month advance, respectively.
What are street level IUL commissions?
At the street level, commissions for Indexed Universal Life Insurance (IUL) typically range from 75% to 90%, varying depending on the insurance company. This commission level is commonly offered by IUL Field Marketing Organizations (FMOs) or Brokerage General Agencies (BGAs).
Moreover, certain carriers provide bonus amounts that go beyond the street level, offering up to 20% additional commission once you achieve a specified production milestone. For instance, if you write $50,000 in IUL target premium within a calendar year, some companies may retroactively grant you an extra 20% commission starting from the first dollar.
In this scenario, you would earn an additional $10,000 above your standard commission level. It is advisable to inquire about production bonuses to ensure you maximize your earnings potential.
Getting higher IUL commission levels
It always succeeds, agents never want low-level commissions which is understandable. Above are two uncommon scenarios that are unimportant for you to understand.
No Proof of Production or Success
If you have no production history or experience selling IULs, you should NOT use commission rate as a criterion for contracting with a company. Based on the quantity of support you will receive, you must consider all offers at or below street level. If someone offers you less than street-level iul commissions, you must ensure that the support they provide will advance your career.
Proof of Production
If you are a proven producer with supporting documentation, you should have no trouble negotiating iul commission rates above street level.
Finally, you should not expect something for nothing. If you lack the experience to demand or negotiate a higher commission, you should remain focused on receiving the finest IUL training possible in order to increase your production over time. Many agents place the vehicle before the horse.
110% of zero output is $0. If you have no idea how to sell an IUL, don’t fool yourself into believing you deserve IUL commissions over street commissions.
However, if you are an outstanding producer, you should be compensated accordingly.
What is an FMO?
An FMO is a field marketing organization that has a distribution agreement with an insurance company. National Marketing Organizations (NMO), Brokerage General Agencies (BGA), Managing General Agents (MGA), and Independent Marketing Organizations (IMO) are common names for FMOs.
Does an independent agent need an FMO?
Yes, in my opinion, but that is only my opinion.
Some carriers may offer direct contracts, but in most instances they will route you through one of the wholesalers listed above. If you choose to use an FMO for your IUL contracts, you should review the following capabilities to ensure that they can meet your requirements.
Illustration and Supplies Support: What sort of support system do they have to ensure prompt delivery of illustrations and sales materials?
Case Management: How is their system configured to notify you of missing requirements that are delaying case placement?
Experience: Does their team have specialized knowledge of IULs? This is a significant issue because not all life insurance wholesalers can support the IUL sales process adequately.
Advanced Markets: Do they have a specialized team for sophisticated markets? This is especially essential if you intend to target business owners or clients with a high net worth.
Legal Team: It is not uncommon for a sales agent to need legal counsel in certain sales situations. The seasoned IUL FMOs will have an internal resource to ensure that you and your consumers are connected promptly.
These are just a few of the essential components that your FMO, BGA, or whatever you prefer to name it, must possess to support your efforts to sell IULs.
Understand Retirement Income Planning Basics
It is essential to grasp the fundamentals of retirement income planning if you intend to sell IULs as part of your retirement planning.
Even the most basic insurance product is intricate.
I’m not referring to the product’s actual features and benefits (which can be complicated).
The key is comprehending the environment surrounding your product…the factors that can make or break its performance in meeting client needs.
How, for example, can you make a compelling case for an IUL as part of a retirement plan if you do not have a firm grasp on the fundamentals of retirement income planning?
There are three primary tax scenarios that significantly impact retirement income. Before selling IULs, you must have a functional knowledge of each of the following.
Capital Gains Tax
Capital gains tax may be applied to the following prospective sources of income for those nearing or already in retirement:
- Mutual funds (outside of qualified retirement plans).
- Stocks (outside a qualified retirement plan).
- Proceeds from the sale of a company
- Real Estate
Retirement Plans Subject to Ordinary Income Tax
These are examples of accounts that reduce your adjusted total income for tax purposes:
- Traditional IRA
- Simple IRA plans
The client makes contributions to these tax-deferred plans, which become available without penalty at age 59 and a half. The client will then be taxed at their then-current tax rate. Withdrawals made prior to age 59 12 are subject to a 10% penalty.
These are the most commonly encountered retirement plans in the field.
Retirement Plans with Tax-Free Benefits
There are several methods to benefit from tax-free income sources. They consist of:
- Roth IRA
- Roth 401k
- Cash Value Life insurance
- Municipal Bonds
What are you going to do with this information?
You investigate each of the aforementioned income sources to gain a thorough understanding of the landscape. Then, you consider how their interrelationships affect the overall financial plan or the client.
I frequently refer to the best-seller Tax-Free Retirement by Patrick Kelly. He does an excellent job of describing a straightforward method for utilizing multiple income sources.
Advising Your Clients to Take Advantage of Free Money Options
Can we all concur that free money is beneficial?
An example of free money would be an employer’s contribution to a 401(k) plan. There are few things better than receiving a sizeable portion of your income from your employer and watching it grow tax-deferred.
We believe that a 401K is an essential component of a person’s retirement plan, and they should take full advantage of this opportunity when presented with it.
Traditionally, life insurance agents cannot set up 401k plans, so it is essential that your clients work with their employer or investment advisors to ensure that their 401K is properly optimized.
Indexed Universal Life vs. Whole Life Insurance
Most individuals believe they are identical. Although they share similar genetics, the categories of customers they serve are distinct.
The primary product of companies such as Northwestern Mutual, New York Life, Mass Mutual, and Guardian is whole life insurance.
For all the correct reasons, these four companies consistently rank as the best whole life insurance providers.
These companies do not sell indexed universal life insurance because it does not align with their strategy of stable historical returns in the form of guarantees and dividends.
Whole life is the finest option for customers seeking guarantees and dividends.
Whole Life Insurance Pros and Cons
Whole Life Pros
- Cash accumulation that is accessible via loans or withdrawals.
- Early cash value enhancements are available to extend the amount of time your client has cash values that are nearly equivalent to premiums paid.
- Paid-up additions, or the capacity to purchase additional insurance without additional underwriting.
- Previous dividends paid
Whole Life Cons
- No market downside protection. Subject to market fluctuations.
- Fixed premiums only, which fund the base death benefit and guaranteed cash growth (base death benefit) as well as the portion of the policy that builds cash value.
- It can take longer for cash value to accumulate in a whole life insurance policy.
Indexed Universal Life Insurance Pros and Cons
As previously stated, IULs were designed for customers who had a low tolerance for “market” losses but were amenable to a product that allowed them to participate in gains.
Indexed Universal Life Pros
- Protection against market volatility on the downside through the use of floors. This ensures that your account will never earn less than a predetermined interest rate, typically 0 or 1 percent, even in years when the market is negative.
- Greater prospective returns with uncapped allocation strategies. Always evaluate the available allocation methods that impact cash accumulation performance, as many uncapped strategies frequently overpromise and underdeliver. Therefore, it is a pro, but you must be careful when explaining this to your consumers.
- In certain circumstances, cash value can be equivalent to first-year premiums. This enables companies to list the indexed universal life insurance policy as a positive asset on their balance sheet, yielding much higher returns than CDs or money market accounts.
- Flexible premiums allow proposed insureds to modify their contributions based on their financial situation in any given year, while maintaining their death benefit.
Indexed Universal Life Cons
- Cash accumulation is founded on market index performance as opposed to contractual guarantees. IUL does not offer minimum guarantees such as 3-4%, unlike whole life.
- Numerous product attributes and costs are subject to change.
- Similar to term life, the minimum premiums required to maintain the policy can increase over time based on the interest rate environment. However, it is only a weakness when used improperly, which is another reason why you need a strong support system to help you correctly execute illustrations.
Therefore, is indexed universal or whole life insurance superior?
The response is…it depends.
As an agent, your first responsibility is to comprehend the requirements of your clients, evaluate their goals and risk tolerance, and then make a recommendation based on their specific circumstances.
IUL vs. 401k
How does an Indexed Universal Life policy compare to a qualified retirement plan such as a 401(k)?
indexed universal life continues to be a popular alternative to 401(k) plans.
As previously mentioned, the comparison between IUL and whole life insurance is not apples-to-apples. Therefore, you must weigh the benefits and drawbacks of each option while bearing in mind that each scenario is unique.
Let’s first examine the pros and cons of a 401k and then compare it to indexed universal life.
401k Pros and Cons
- Funded with pre-tax dollars (this means that the income reported on a tax return is reduced by the amount contributed to the 401k before taxes are due that year, deferring tax payments until retirement age or when the account generates income).
- Employer contributions are one of the few methods to obtain “free money” outside of inheritances and lottery wins. Typically, an employer will match 401k contributions dollar-for-dollar if they satisfy a certain minimum threshold, such as 3%. (This means that if an employee invests 3% of their salary in a 401k, the employer can contribute an additional 3%, bringing the total to 6% of the employee’s annual compensation).
- Covered by ERISA. The Employee Retirement Income Security Act (ERISA) is the federal law that protects those who choose to participate in a qualified retirement plan. One of the most important safeguards is an appeals procedure that ensures benefits are paid and mismanagement is rigorously punished.
- If money is withdrawn prior to age 59 and a half, there will be penalties.
- Annually or whenever allocation adjustments occur, management fees are deducted from the account balance. If a 401k account balance exceeds $400,000, annual fees can easily be $10,000 to $15,000 or more.
- As the premiums are directly proportional to market performance, market volatility can rapidly diminish the performance of previous years.
- Annual contribution caps
IUL vs. Fixed Indexed Annuities
This is a common query, and we recently published a comprehensive article demonstrating how IULs can in fact outperform fixed indexed annuities in certain scenarios.
IUL vs. GIUL
Numerous individuals are unaware of ensured indexed universal life insurance. It is an excellent instrument for presenting life insurance solutions to clients.
We recently published an article detailing how you can present GIUL as an alternative to IUL to your consumers. It’s remarkable how using multiple IUL quotes strategically can increase your closing percentage.
What are the ways clients can access cash values in their policies?
The client’s ability to access the cash value of their policy is one of the major selling factors of IUL policies. There are multiple methods they can accomplish this.
This type of policy loan has no impact on the performance of any existing index strategies. With a participating loan in effect, it is not necessary to discontinue and transfer to the fixed account any segments that secure the loan.
A policyholder can borrow against a mortality benefit and may be required to pay a variable interest rate in order to restore the policy’s full benefits.
This type of loan against an insurance policy enables the policyholder to obtain a loan, but the loaned values continue to accrue interest. It is predicated on the return of the Loan Index Strategy. Interest is levied in arrears following the crediting of interest earned by the Loan Index Strategy.
Possible IUL Scenarios
When does it make sense to use 7 or 10 pay solutions?
When a policyholder is between the ages of 35 and 55, this method is typically recommended. This enables the policyholder to pay sufficient premiums for 7 to 10 years so that the policy is paid in full for its duration. This is yet another reason why you should always consider a multi-pay solution when creating client proposals.
What scenarios make sense to illustrate IUL as a MEC?
This scenario makes sense when a policyholder is certain they want to leave a death benefit on their policy, or if they prefer tax deferral and a high early cash value to tax-favored distributions.
How do you use term riders to build stronger cash value and higher death benefit?
Term riders can be used to reduce the cost of insurance and permit more funds to be allocated to cash value or the purchase of a higher mortality benefit.
How to Generate IUL Leads: The Prospecting Process
IUL leads are not typically generated using the traditional methods most agents are accustomed to using, such as telemarketing, direct mail, or even the internet.
Because selling indexed universal life insurance is difficult, and complex purchase decisions are typically not effective lead magnets for consumers.
What’s the best way to generate IUL leads?
There may be those who disagree, but here is my viewpoint.
Strategic partnerships are the most effective method for generating leads for IULs, but they require time.
New agents frequently believe they can immediately begin selling IULs before realizing the market is vastly different from what they are accustomed to. It takes time to become an expert, but establishing and maintaining strategic partnerships requires even more time.
If you are new to selling IULs, our process for building strategic partnerships can help you get up to speed quickly.
Steps to Developing a Rock Solid IUL Lead Generation Strategy
1. Become an expert
This requires no explanation.
You must choose to immerse yourself in order to become an expert. Our editors always caution us against disseminating already-known information, but I feel compelled to reiterate this point.
If you don’t do this, you will fail. The conclusion of the story.
Do your research or do not attempt to sell IULs.
They are too complicated, and attempting to “fake it until you make it” will place your clients at risk. Take the time to properly educate yourself, and be patient with your clients as they assimilate the information.
How to become an expert in IULs?
Step 1) Think Advisor, InsuranceNewsNet, and Insurance Journal should be read. You have access to three reliable resources with excellent content on IUL strategies and implementation methods.
Step 2) Create an alert on Google. Google alerts is an excellent method to keep track of daily content that is significant to you. Simply visit Google and input “Google Alerts” in the search bar. If you have a Google account, you will be asked to input the phrase for which you wish to receive alerts. You can then select whether you want daily or weekly alerts. I would choose daily because you should devote time each day to learning about IULs.
Step 3) Attend carrier webinars. In the world of spam email, it can be difficult to determine what to retain and what to discard. My inbox is organized because I use Google business email and create categories for the companies I wish to monitor and follow. Virtually every time a representative from an IUL company hosts a webinar on IUL strategies, I attend or have a virtual assistant attend on my behalf and take notes.
Engage with your clients. This is the greatest method for learning about IULs. You cannot be hesitant to engage in conversation with your clients, even if the topic is unfamiliar to you. Here is the strategy that will hopefully allay your concerns.
Your clients already have faith in you, and they sincerely want you to succeed. If they do not, you need to reevaluate your relationship-building abilities. If your motto is to always treat your clients with respect, then this is a no-brainer. Use the language listed below.
“Mr. Client. I appreciate your trust in me to assist you in mitigating the risk associated with (burial insurance, estate planning, Medicare, or whatever other service you provide). This year, I am expanding my business in part by educating my clients on retirement savings diversification.
“I’ve received training on how indexed universal life works into a financial plan, and if it’s okay with you, I’d like your assistance.
“If it’s alright with you, I’d like to complete a brief fact finder that will help me become more comfortable with the questions I should be asking my clients in order to obtain the most pertinent information. I will then return to my office and collaborate with my internal support teams at the various insurance companies to determine if IULs have a position in your portfolio.
“The best-case scenario is that we identify a deficiency and educate you. In the worst-case scenario, we discover that your portfolio is well-positioned, and I leave with a wealth of knowledge.
“In any case, it will be extremely valuable to me.
“My fact finder requires approximately 15 minutes. Do you have any questions before we begin?”
As you can see from the language above, you are simply engaging in an honest conversation with your clients, which goes a long way.
There is NOTHING improper with this strategy when learning to sell IULs. Everyone must begin somewhere, and the best way to continue learning about IULs is to rely on those who already know and trust you.
This is not a sporadic practice; it is a constant routine. Ensure that you are doing this consistently, and you will consistently have learning opportunities.
2. Leverage Existing Clients and Conduct Policy Reviews
This is the easiest and most frequently overlooked means to generate IUL leads.
Because the majority of agents prejudge their current clientele and presume an IUL would not be suitable for them. This is a common error made by inexperienced agents who have not taken the time to accomplish Step 1, which is to become an expert.
Your clients already recognize and rely on you. Utilize this relationship!
According to LIMRA, approximately 80% of people with life insurance have no relationship with their agent, and 50% of those people acknowledge they need more life insurance.
Schedule review meetings with your clients and evaluate their objectives and concerns. This process of gathering information will open more doors than you can count, and you’ll soon realize IUL has a place in the majority of your client’s financial plan.
Sending your clients a pre-approach letter detailing what you hope to accomplish in your next meeting is a fantastic way to begin this process. Try sending 20 letters per week and then following up the following week. This may appear excessively simplistic, but it is effective. Try not to reinvent the cycle.
3. Asking for Referrals
Do not skip this phase, as referrals are free and you will have no trouble acquiring them if you ask existing clients for them. Always remember that you will never receive what you do not request.
4. Centers of Influence
Finding a center of influence is essential because it enables you to have someone else prospect for you while you focus on your other channels of prospecting.
For instance, connect with an agent who sells employee benefits to groups and continually remind them of the advantages of using IUL with business owners.
Over time, they will advocate for you and begin introducing you as their trusted resource to help their business owner clients comprehend how to utilize indexed universal life for their businesses.
Another example would be a partnership with a lawyer specializing in estate planning. They can have a significant impact on clients’ decisions regarding the allocation of existing funds, and indexed universal life insurance is a common solution.
5. Strategic Partnerships
Strategic alliances are significantly more complex than centers of influence. A strategic partnership with a local group of tax attorneys or estate planning attorneys would be an excellent example. In an ideal world, these strategic partners would be licensed to participate in life insurance commissions.
Establishing a strategic partnership allows for a deeper level of brand integration, ultimately serving as a valuable resource for your clients.
IUL Illustration: How to
One of the keys to a successful IUL presentation is the precise execution of the IUL illustration.
A significant emphasis should be placed on explaining how an IUL fits into a client’s overall retirement plan. Constructing an IUL case design will provide vital information and answers to many of the concerns a client may have, as well as remove obstacles that could impede a successful transaction.
An IUL illustration should only be performed by a licensed insurance agent or wholesaler.
Typically, no one is more knowledgeable about indexed universal life insurance than the internal wholesalers, and the best way to ensure an accurate and comprehensive case design is to utilize their vast resources.
The Elements of an IUL Illustration
One of the keys to crafting a successful IUL illustration is determining how the illustration addresses the client’s financial and insurance goals. Consider each of these elements in relation to the requirements of your client.
Many believe an IUL is identical to whole life insurance and is another method to obtain life insurance until death. With the incorrect policy, unneeded premiums will be paid for a solution to the certainty of death.
If cash value is not the objective, the insured should not be required to pay for these extras.
Cash Value Growth
If your client’s goal is to accumulate and access cash values, an IUL is an excellent choice. There is a minimum cost to purchase the mortality benefit as well as additional costs that are used to initiate cash value growth accumulation.
Once the client’s objective is crystal clear, you can begin comparing the efficacy of various products.
Age of the Client
Age is a factor… no mystery there. However, when it comes to IULs, not all policies are created equal.
Different IUL products from insurance companies are better suitable for clients of different ages.
It is all about mortality tables and insurance costs.
Their actuaries analyze mortality tables and modify the front- or back-loaded costs of insurance policies.
A youthful applicant, for instance, could benefit from an IUL policy with higher insurance costs during the first 10 years, allowing for greater cash value growth in the future. It is assumed that a younger proposed insured has more years to keep the policy active, allowing the insurance company to manage its risk over an extended period of time. If someone were to purchase a back-end laden policy, the policy’s expenses are lowest in the early years and rely on early success to offset the higher costs in later years.
Current Life Insurance Mortality Tables
A mortality table estimates the population mortality rate over a specified time period. It predicts life expectancy at a particular age. As mortality rates change, so do life insurance premiums.
As medical care continues to advance, the average lifespan of humans continues to increase. This has a direct effect on insurance costs, resulting in lesser premiums.
Existing life insurance clients should always have their policies reviewed for this reason alone.
They may be healthy and insured under an outmoded mortality table-designed product. You would be amazed by the number of policy reviews that result in replacements for this reason.
Indexed Universal Life Insurance Cost of Insurance
The cost of insurance is calculated by insurance companies using variables such as administrative costs and mortality rates. Depending on the sort of policy, the cost of insurance may be covered by customer-paid premiums or by cash accumulated in the policy over time.
As a general rule, the elder the applicant, the higher the insurance premium. This is one of the most influential aspects of IUL performance, particularly when illustrating financial value for tax-free retirement income.
One of the most significant differences between IUL products is the manner in which insurance costs are distributed. Some IUL products have front-loaded insurance costs, which limit early gains, whereas others have back-loaded insurance costs, which permit earlier cash accumulation.
Customers are not all the same, so be prepared to conduct investigation.
Now that you comprehend the key components of an IUL illustration, let’s examine one of the best illustration software programs for life insurance.
WinFlex is an Important Part of Selling IULs
Why WinFlex is the Best Quote Tool for You
Learn how to sell indexed universal life insurance by utilizing WinFlex. It is a free resource for real estate agents and a game-changer in terms of making the process simple and quick.
In fact, it is the most popular software used by insurance companies, such as Global Atlantic (formerly Accordia), Lincoln Financial Group, National Life Group, Prudential, Voya, AIG Partners Group, North American, Allianz, and many others.
Each of these organizations can be added to your Winflex account upon request.
What we like about WinFlex
Winflex provides you the ability to create and save customized IUL illustration templates for future use. For example, you can save your preferred tax-free retirement case design for use on future cases.
Additionally, you can transition between products without having to re-enter information. This is extremely useful when comparing multiple companies to determine the best option for a client. For instance, you can compare the IULs of Global Atlantic and Lincoln, etc.
Other great functions of WinFlex:
- Flexibility in entering initial year premiums (e.g., 1035 transfer versus EFT).
- Ability to select from multiple premium modes in distinct policy years. Especially vital for universal life index illustrations.
- Multiple ways to adjust crediting methods.
- Compare multiple IUL illustrations from various life insurance carriers.
- Numerous case design templates that take into consideration death benefit and cash value objectives.
How to Use WinFlex: A Step-by-Step Tutorial
How to Get a WinFlex Login
To obtain a free WinFlex account, you must be registered with your upline (BGA, IMO, MGA, etc.).
You must ensure that you have access to all of the top indexed universal life insurance providers. If you attempt to create the account on your own, you may not have access to the necessary companies to conduct an accurate comparison of clients.
If your existing upline has a WinFlex account, they must add you promptly (adding and approving a new WinFlex user takes five seconds). Copy and paste the text below and send it to your upline contact if you’re uncertain what to ask them.
“Hey [Name], could you kindly grant me access to WinFlex? I require access to begin generating my own illustrations for indexed universal life insurance. Thanks, [Agent Name]”
How to Use Winflex Illustration Software to run IUL Quotes
WinFlex is available in desktop and online variants.
We always recommend using the web version, so you never lose out on software updates. Constant change occurs in the insurance and financial industries. You do not want to mislead your IUL clients if you are not using the correct version of your illustration software.
Step 1: Login to WinFlex dashboard.
Step 2: Click Illustrations and start a new case
Step 3: Select Carrier and Product
Step 4: Enter client data
As you can see, getting started is very easy.
Next, you’ll need to know what goes into making an adjusted universal life insurance policy. To finish an IUL illustration with WinFlex, you’ll need to address the areas that are highlighted below.
Once you have put the basic client information into WinFlex, you can continue to create your IUL illustration based on your client’s needs and goals.
Make sure and collect the following information:
- Desired face amount or premium.
- How long your client would like to pay payments. For example, they might only want to pay payments for 7 or 10 years (7-pay or 10-pay life) or pay one lump sum up front and be done with it (single premium life insurance).
- Cash Value or income goals. For example, a client may say, “Show me the numbers it will take to give me an extra $50,000 per year starting at age 66.”
Once you know the basics, you can move on to designing the IUL box.
First, you need to learn how to “solve.” You’ll have to choose one of the options, so it’s important to know what each one gives your client.
IUL Premium Solve Options:
Solve to Endow
This choice lets you show up to a certain time, usually age 120, when the cash value of the policy equals the sum of the premiums paid.
This figure is based on the target payment and works out how much the death benefit will be. Target premium is a great way to find a happy medium when running an IUL illustration because it always gives the client more choices for premiums.
This works out the minimum death benefit for a non-modified endowment contract (MEC) based on the expected premium. For example, if your client and you agree on a $300/month budget, you could use this choice to figure out how much your death benefit will be.
Maximum Non-MEC (max funded iul)
This choice will show the maximum amount of premium a client can pay into a policy without making a MEC. We call this a “max funded IUL.”
This is the floor option, which is the lowest premium the client can pay to keep the policy in effect and pay for the insurance company’s fees and costs during the 5–10 year no-lapse term for any permanent product.
This is a test to see if a product still fits the IRS’s definition of a life insurance policy.
The next step is to decide if you will show distributions, which means getting money from the insurance.
If so, you can just pick the age at which it will start and how long it will last. If you put in the wrong numbers, the system will let you know and show you that the policy can’t work as shown.
Lastly, you can save your IUL drawing for your client, change the contact information, and send a customer-friendly version to keep the sales process going.
How to read and understand an IUL illustration
There are 3 columns you need to understand on an IUL illustration.
- What is the least amount that is guaranteed? This is a sure thing no matter what happens. It will depend on the company.
- What is the middle, and why does it matter? This is possibly the worst thing that could happen.
- What is the “not guaranteed” column? The non-guaranteed column is an average of the last 25 years based on a formula and the cap rate for the product or tracking feature in question. Based on how things have gone in the past, this is often the best case situation.
How to explain the NAIC illustration page?
Since an IUL, like a UL, puts some of the risk on the client, there are three situations to understand.
Guaranteed thinks about the lowest interest rates that can be paid out and the highest fees that can be added to the contract (from day 1).
Most of the time, the midpoint is 50% of the costs and interest that have been credited between the Current Assumption and the Guarantee.
The Current Assumption shows the result of current charges and the highest rate that can be used as an example. Even though none of these things are likely to happen, it’s important to know what could.
This page is important because it shows people how things can change over time.
Let’s start with the question that many life insurance agents always ask their clients: “Do you have the old kind or the new kind?”
What’s the difference between the old kind of life insurance and the new kind?
What is Indexed Universal Life Insurance with Living Benefits?
“New type of life insurance” is what the business world calls life insurance with living benefits. Old life insurance doesn’t have benefits for living, but new life insurance does.
Simply put, living benefits in a life insurance policy let the policyholder use a portion of the face value of the policy while they are still alive, as long as they meet the requirements of the life insurance business.
Think about the following possible situations and ask yourself if it would make sense to teach your clients about the old or new type of life insurance:
Indexed Universal Life Insurance Scenario A (OLD TYPE)
Client A is putting $150 into their indexed universal life insurance coverage every month. The program is doing well and growing by an average of 5-7% per year. If the client dies, their family will get $500,000 tax-free. This is the usual way that people use life insurance, which is when someone dies. If the client needs to use the cash value after they leave, they will have about $30,000 per year for 20 years, tax-free.
What if they have a stroke, though? Or find out you have MS or Parkinson’s?
The client’s family will have to use their funds to pay for long-term care at home or in a facility, which will put a lot of stress on their income and/or way of life.
Indexed Universal Life Insurance Scenario B (NEW TYPE)
Client B pays $170 per month for an adjusted universal life insurance policy that is growing at an average rate of 5-7% and is doing well. They will also get the $500,000 death benefit and a cash stream of about $30,000 per year when they retire. The same as above, but here’s what’s different.
If client B is diagnosed with a serious sickness or has a critical illness like a heart attack or stroke, they can take 2% of the death benefit (2% of $500,000), which is $10,000 per month, to pay for long-term care or health care at home.
In this case, the death benefit from the insurance is used to help pay for or cover the costs of treatment, so the family doesn’t have to pay out of their own savings.
Some plans even let clients get the death benefit up to two million dollars early. This is another reason why it’s important to compare companies so you can give your clients the best choice.
Does it make sense to pay hundreds of dollars a month for a long-term care policy when you can just upgrade your life insurance for a part of that cost (if your client qualifies)?
Using life insurance with living benefits is a good way to plan for long-term care without having to pay the high premiums that an LTC coverage usually comes with. Plus, if your client is already using linked universal life insurance as an alternative way to save for retirement, they might as well let it do double duty.
I think that everyone who already has life insurance should replace their old plans with the new ones that include living benefits.
Using Indexed Universal Life Insurance with Children
Indexed universal life insurance is a great way for children as young as 2 weeks old to start saving money.
Because the IRS lets fixed life insurance offer tax-free benefits, it’s important to think about how it can affect you when the cost of insurance is at its lowest.
This means you can spend more of your insurance money on growth than on the death benefit.
The example below shows how an insurance that cost $100 a month when it was bought for a baby could be worth $1,400,000 in cash at age 66.
Why wouldn’t you show them this choice if you knew they could save up $1,400,000 for retirement if they just put away $100 per month?
This is a great example of how teaching someone about fixed life insurance can help their family not just when they die, but for many generations to come.
To help you really understand this, here is the same case as above, but with a $500 premium. The illustration shows that the cash value is almost $8 million and that the death benefit is almost $10 million. This is a great example of how you can show your clients how to spread their retirement savings by using indexed universal life insurance.
SELLING TIP: Call all of your existing clients with children and simply state the following.
Hello CUSTOMER NAME,
I hope everything is going well with you. I just wanted to let you know that we have a new program for kids that is a great option to 529 college savings plans. At the very least, I think you should know about it, and I’d be happy to give you the big picture. This week, I’m free for a 15-minute call on Tuesday or Thursday. Does either of those days work for you?
How Business Owners Use Indexed Universal Life Insurance
This is one of my best topics because it helps me sell IULs so well.
Business owners are among the most open to learning about IULs and the benefits they can offer.
Because business owners are the ones who pay the bills and take on the company’s responsibilities. If you can show them more creative ways to use life insurance to make their business run better, they will be very interested.
Here are 5 ways IULs are used by business owners:
Use IUL for Deferred Compensation
Because the IRS code lets you take tax-free loans from indexed universal life insurance, companies often use this to create deferred pay packages for leaders to keep them on board.
This means that the company can buy an IUL on a key employee that matches the benefits package in the employee’s job contract. For example, a company gives its COO an extra $30,000 in retirement income based on how well he or she meets certain success standards. The company can pay for the policy with the cash it already has on hand and keep the policy as a good asset on its balance sheet, dollar for dollar, in the first year.
If the company is going to keep cash reserves for future deferred salary payouts, they can earn a higher interest rate on those reserves by putting them in an indexed universal life insurance policy. They can also get tax-free loans, which lowers the amount they have to pay out of their own pockets when their boss starts taking distributions from his or her retirement fund.
IUL Used to Fund Buy-Sell Agreements
Every business has a succession problem that needs to be solved. This is directly linked to what happens when a key partner dies or can’t do their job anymore because of illness or disability.
If we use the case from above, the policy death benefit would cover the Buy-Sell part of their plan. This means that if the key employee dies, the money from the life insurance policy would buy out the family’s share of the business at a price that had already been set.
IULs Fund Key Man Agreements
Getting a business’s key employees and executives insured is another problem that is related to succession.
A key employee’s life is covered by life insurance to protect the business in case of death or injury. Not to be confused with “Buy-Sell,” which is used to buy out the equity of a deceased partner in a business, “Key-Man” is meant to make up for lost income from a key employee or the cost of replacing that key employee.
It is very important to know how the two situations are different.
Increase Growth on Cash Reserves
If a business is lucky enough to have cash savings, it can use permanent life insurance to get a return that is much higher than what it would get from bonds, CDs, or money market accounts.
Look at the examples below to get a better idea of what I mean.
Cash Reserve Scenario A
- Business has $1,000,000 in cash reserves
- Reserves are kept as an asset on the balance sheet to keep the current valuation (the value of the business, which is used to look for chances to buy other businesses in the future) accurate.
- Reserves are earning 1% in money market account.
- Reserves are liquid in the event of an emergency
Cash Reserve Scenario B
- Business has $1,000,000 in cash reserves.
- The business buys linked universal life insurance with an early cash value and riders that let them not have to give up the policy.
- Policy stays a dollar-for-dollar asset on the balance sheet to keep the current price (the value of the business, which can be used to buy other businesses in the future).
- Historic performance averages 6%.
- Fixed account offers 4% guaranteed.
- Reserves are liquid in the event of an emergency
- Policy cash value is worth $1,000,000+ with a tax-free death benefit of $8,000,000.
Which of the following do you think a business owner would choose?
Increase Performance of Required Reserves
Similar to the case given above, many businesses, like construction companies, need to keep a certain amount of cash on hand to keep certain types of bonds.
These are great examples of businesses that can benefit from the cash that builds up in an indexed universal life insurance policy.
The key to making these kinds of policies is knowing the best IUL companies that offer the riders a business owner needs to make this a good plan.
SELLING TIP: Make sure you think about using an early cash value rider to let your business owner clients have the same or more cash value in the first year so they can keep the insurance as an asset on their balance sheet. In this case, you don’t get more of your fee up front, but it’s often best for your client.
You can also write the following in an email to any business owner clients or friends you have:
I hope you’re doing well. I’m writing to you because I recently heard about a show that made me think of you. I’m guessing that, like most business owners, you have some cash savings in your business that are probably in a low-yield account. We have a program that will let you make more on those reserves while still keeping them available. You can also use them to pay for any buy-sell deals or key man agreements. Business owners are all talking about how interesting the training is. I’d love to tell you the big picture. Do you have 15 minutes for a short call on Tuesday or Thursday?
Indexed Universal Life Insurance Basics
Below are the common IUL definitions you should know before you get started.
What does cap rate mean?
The most linked interest your policy can earn in a policy year. If you have an IUL policy with a cap of 14% and the index gives 29%, for example. All indexed interest up to 14% will be added to the policy, and the rest of the gains will be kept by the insurance business.
How does cash value work?
Cash value is the amount of cash in the policy that the insurance holder can get through loans or withdrawals.
Cost of Insurance
What does “insurance cost” mean?
The “cost of insurance” for a life insurance coverage is based on three main factors: death, interest, and company costs.
How do payment methods affect an IUL or a permanent life insurance policy?
Crediting methods are what you choose to help meet the policy performance goals of your client. There are many different kinds of methods, and the best one is the one that meets the client’s needs based on how much risk they are willing to take. Some ways are more aggressive than others, and you can compare them by running different illustrations with WinFlex or software made by an IUL company. Here are three of the most popular ways to do things.
- Monthly Average
This is a great way to calculate credit to lower the risk of volatility. Take the monthly values for a year, remove the index value for the first month, and divide by 12. If the result is positive, the policy gets a credit up to the limit. If the result is negative, the policy doesn’t take any loss.
- Monthly Point-to-Point
At the end of the year, the positive or negative index rate for each month is added up. This can be one of the best ways to make money, but bad months can have a big effect on the adjusted interest added to the policy at the end of the year. The caps and floors are used based on what the policy says they should be.
- Annual Point-to-Point
This method is the most used and has the best average. It’s like the Monthly Point-to-Point, but only once a year does tracking happen.
IUL Interest Crediting Options
IUL Policy Expenses
The costs of running the insurance company, such as salaries, commissions for agents, rent, legal fees, mail, advertising, etc. These costs of doing business are often called “expense loading.” These costs are different for each life insurance business and can make a big difference when you show your clients their options.
What is the meaning of a floor?
Most companies that sell linked universal life insurance have 0% floors to protect cash values from years when the market does poorly.
This means that even if the market has a bad year, the insurance will not suffer a loss. Fees and charges can hurt the cash value, but not the success of the market. Because of this, you need to make sure and show your clients how their IUL plans work so that the fees and interest rates won’t hurt them in bad market years.
IULs can promise that you won’t lose money even if the market goes down because they aren’t invested in the market.
IULs are invested in options, which means that if there is a bad year, the insurance company doesn’t perform their options and neither a gain nor a loss is added to the policy.
Minimum Performance Guarantees
Some companies “True Up” performance every “x” number of years, but this is not a floor. For example, some companies will measure the performance of the policy every 5 years, and if 2% compounding beats the client’s performance record, they deposit the difference. This isn’t a floor because they don’t get this in a Zero Year.
An external index is tied to a part of the IUL premiums, which are used year after year to build up cash value. Some of the index choices are the S&P 500, Barlcay’s, Hang Seng, and others, but this list is not complete. For each policy you sell, you should help your client choose the best index choice, since each index option has its own pros and cons.
Interest gains are added to the cash prices of IUL policies based on how well an external index, like the S&P, Heng Sang, or Barclays, has done. The fixed interest is locked into the policy at the end of the year and can’t be lost.
This is a type of bonus that gives extra money back to plans that have been in effect for a long time, usually 10 years or more.
A 10% index increase after 10 years would be an example.
If the index result is 11% and you get the index multiplier in that year, you will get an extra 1.1% interest credit on top of your base Index Interest Credit (11% times 10% = 1.1). This number is added to your policy, along with the earnings from your index.
Customer Longevity Bonus
As a form of gratitude bonus, many companies offer another type of bonus. Most of the time, this is for people who have paid their premiums for more than 10 years, but some companies offer it as early as year 5. This is usually anywhere from 0.50% to 1% of the account’s value, no matter how well the index does and on top of that.
A factor in how much insurance costs. Companies put their customers’ fees into investments and expect to earn a certain rate of interest on these investments. It is an important part of building premiums because they need to predict how much money they will make from the premiums paid.
This is the most of the payment that can be put toward the cash value of the policy when life insurance is used to save money or get a tax-favored income.
A max-funded iul is what agents or dealers will call this.
This is usually the best amount because the policy holder can make interest on it. The best example would be when a client’s main goal is to save as much money as possible.
But max funded iul isn’t always the best plan for your clients, so make sure you always look at the different ways to run an indexed universal life illustration.
What Maximum Funding is not. Some people choose this choice because the death benefit is the highest and the premium is cheaper because less of the premium goes to the cash value. Because the cash you save is used to pay for your insurance, this funding choice may also put your policy at risk.
Modified Endowment Contract (MEC)
A modified endowment contract is a way for a life insurance policy with payments that add up to more than the federal tax law allows to get tax breaks.
When a policy becomes a modified endowment policy, the way it is taxed and how the IRS classifies it changes. If your policy becomes a MEC, your client’s accumulation will still be tax-deferred, but if they need cash, they will have to first access the interest in their policy and pay taxes on the payout or withdrawal.
If they are younger than 59 12 years old, they may also have to pay a 10% penalty.
Once you have taken out enough to reach your basis, most payments after that are tax-free.
Life insurance companies are able to pay out death benefits because a lot of people pay fees to the company and share the risk. Mortality tables are used to find out how long the average person in each age group can expect to live.
The participation rate is a factor that affects the indexed interest that is added to a policy at the end of each policy year. For instance, you might sell your clients an IUL insurance with a 130% annual participation rate. If the policy makes 7%, you would multiply that by 130% to get a total indexed interest of 9.1%. Participation rates aren’t in all programs, and in some, they are less than 100%. To properly show clients what they can expect and set the right expectations, it is important to know what options are available.
The cash value of a policy is its surrender value. This is the value of the policy after any fees or fines have been taken into account.
Target premium is the premium that insurance companies use to figure out how much an agent will get paid.
For example, if your commission on an IUL contract is 80% and the goal premium of a recent IUL you sold is $1,000, your commission would be $800.
The annual premium and the goal premium are NOT the same thing.
Let’s go one step further with this. If you sell a policy with an annual premium of $1,500, the goal premium may only be $1,000. Using the 80% commission example from above, your iul commissions on a $1,500 sale would be $800.
One of the most common issues we hear from agents who are new to selling indexed universal life is that they don’t understand what a “target premium” is.
IUL fees are the same as those for any other type of life insurance and can vary from company to company.
Read Also: Does Landstar Offer Health Insurance?
A Brief History of Universal Life Insurance
In the late 1970s, the insurance industry tried to come up with a product that combined the protection of permanent life insurance with choices for how the cash value could be used.
People often used the word “investment” when talking about general life, but that was not at all the case.
Interest rates were at an all-time high at the time, and our industry was scrambling to find a way to profit from high rates with a product that was better than the guarantees of a whole life insurance.
Initial Goal of Universal Life Insurance
At first, the goal of universal life insurance was to separate the payment loads, expenses, fees, and cost of insurance so that the customer could decide how much they could save based on what they could see happening inside the policy.
This put some of the danger on the customer instead of the insurance company, but it also gave the customer a lot of freedom. At a time when certificates of deposit were giving returns of 10% or more, this was a smart move.
Some of the flexibility it brought included:
- Being able to start and stop paying premiums.
- Ability to make premium payments that aren’t always the same amount (for example, the customer could now choose to pay more money up front and see how the growth of the base interest affected the amount of premium they needed).
- The ability to see the real interest rate their money was earning, as opposed to a guaranteed growth rate and a non-guaranteed dividend.
Our business wanted to get some of that work.
Universal life was made to be more flexible for the customer than whole life insurance. It gives the customer a number of choices to combine the benefits of insurance with meaningful growth.
Universal Life was a True Hybrid Product
It wasn’t unusual for agents to make universal life illustrations with returns of 10% or more, which made for a very engaging story of money building up over 10, 20, or 30 years.
But there was a problem that still comes up in general life.
Those rates were not promised, which is why they are causing problems for many policies and policyholders who did not know what was going on.
Since the late 1970s, there have been three major times when interest rates dropped or plummeted. This made it so that cash savings couldn’t keep up with the rising cost of insurance.
This means that, over time, the plans eat away at themselves and may need a lot more money in premiums, sometimes just to cover the minimum costs for a death benefit.
This made a lot of people with universal life insurance angry, either because their agent lied to them or because they didn’t understand the fine print. A mess that is still being cleaned up by many agents today.
Because of these actions, agents and customers were treated badly, and the image of universal life products was hurt.
If there’s a lesson to be learned, at least according to the critics, it’s that we in the business didn’t do a good enough job of explaining the bad things about universal life.
Indexed Universal Life Insurance to the Rescue
In the late 1990s, the floor on interest rates dropped for the second time since universal life was first introduced. This is when the insurance industry came up with indexed universal life, a type of permanent life insurance that lets you pay more than the minimum cost of insurance.
The growth of a measure of stocks, like the S&P 500, is tied to the over-funded premium. Based on how the index does, the insurance business keeps track of growth and gives it back to the cash value of the policy.
Using section 7702 of the IRS tax law, you can get the cash value without paying taxes on it. This is how the performance grows.
So, universal life grew to include BOTH a growth part and a downside safety part, so that as the market goes up and down, you’ll always have something.
Today, IULs are a great choice for customers who are relatively risk-averse and want growth with limited downside.
As you can see, it takes time and care to sell IULs the right way. We highly suggest that you work with a company that can help you with the following:
- During the process of underwriting, the back office helps with case planning and case management.
- Consistent training is provided to keep you up to date on the frequent changes.
- Can assist you in locating the greatest IUL firms in the market.
- Has historical success as an IUL wholesaler.
- Provides objective, customer-centered advice.
- To better service your book of business, offer lead generation and marketing programs.
Selecting the appropriate IUL partner will be crucial to your success.