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The Most Common Questions Are:

401k Rollover Services

Why Should I Increase My Retirement Savings in a Bear Market?

A slow market or a bear market may make you shy away from investing in stocks or saving for retirement, but it is important that you continue to save and invest even during difficult economic times.

Annuity Quote

I Have Reached My Employer Match - Now What Do I Do?

It is important to take advantage of your employer's match, but are there other options you should consider after you have reached that match? You may want to learn how to grow your retirement savings tax-free while making the most of your savings options with an Indexed Universal Life policy.

Retirement Planning Services

How much money do I need to retire?

The amount of money needed for retirement will be different for everybody. While some people will want to travel and spoil their grand kids, others will not. The best rule of thumb is to add up expected retirement income – social security, pensions, distributions from individual retirement accounts, investments, etc. – and subtract all expected retirement expenses – housing, utilities, taxes, insurance, food, clothes, etc. – to see how much of this will be needed after retirement. The final answer, of course, will be based on anticipated life expectancy. Contact us for a free financial needs analysis

Financial Planner

Is a Fixed Annuity Right for Me?

Once we've done a financial needs analysis, if your assessment produced more than one affirmative answer then you may be a candidate for a fixed annuity and it would be worth exploring the different types that are available. Fixed annuities are complex instruments and they include many features that need to be fully understood. And, because they are a long term commitment, it is important to go into a fixed annuity with eyes wide open. If it is determined that a fixed annuity is right for you, they will be one of the best decisions you can make.

Retirement Planning Services

How can I accumulate cash value in my IUL policy?

An IUL gives you the opportunity to grow your policy value through excess index interest (earnings above the guaranteed minimum rate) that may be credited to your policy based partly on changes in major stock indexes such as the: S&P 500® Index, EURO STOXX 50® INDEX, and the Hang Seng Index. Your life insurance carrier will show you what stock index they follow. We’d love to talk you through the different account options and help you see if this policy is a good fit for you.

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What's a "guaranteed" floor?

Index changes can be positive or negative. However, with an IUL, you have the security of knowing you will never be credited less than the guaranteed minimum interest rate, or "floor." The floor can protect your cash value and helps ensure that segments with a positive value will be credited with interest.

Inside Business

Are there tax advantages associated with an IUL?

Federal income tax-free death benefit

Many people don’t realize there can be tax consequences when it comes to inheriting certain assets. Thankfully, IUL provides a federal income tax-free death benefit to help protect your family.

Tax-deferred earnings 

Any cash value in your policy accumulates interest on a tax-deferred basis. That means higher policy value accumulation potential for you.

Tax-free transfers 

Transfers among accounts inside a policy are on a tax-free basis. Tax-free transfers help protect your earnings from the effects of current taxes.

Tax-free withdrawals and loans

You’ll enjoy easy access to your policy value. When the policy value is sufficient, you may request withdrawals or loans to use for any purpose you wish.

Keep in mind that the tax advantages only apply as long as the policy remains in force. Allowing the policy to lapse could result in adverse tax consequences.

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What's a "No Lapse Guarantee"?

Payment of the minimum monthly no-lapse premium ensures that the policy will remain in force during the no-lapse guarantee period. However, by paying only the minimum monthly premium, you may be forgoing the opportunity to build up additional policy value.

Please note, after the no-lapse period or if the cumulative minimum monthly no-lapse premium requirements are not met, then fluctuations in interest rates and/or policy charges may require the payment of additional premiums to keep the policy in force. Guarantees are based on the claims-paying ability of the company. 

If you take a cash withdrawal or a loan, if you increase your face amount, if you change the death benefit option, or if you add or increase the amount of a rider, you may need to pay additional premiums in order to keep the No-Lapse Guarantee in effect. If the requirements of the No-Lapse Guarantee are not met and the cash surrender value is not enough to meet the monthly deductions and index account monthly charges, a grace period will begin and the policy will lapse at the end of the grace period unless sufficient payment is made. Allowing the policy to lapse may result in adverse tax consequences.

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(Hypothetical illustration only - Individual results may vary.)

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Policy Definitions

What is Indexed Universal Life Insurance (IUL)?

Indexed Universal Life (IUL) is a type of Universal life policy that offers the consumer both opportunity and safety. The opportunity is generated as the cash component of an IUL policy grows as a result of an index based on the performance of a benchmark financial index; specifically the S&P 500®. However, there are different indexes with different products. It’s common for the index performance to have an index cap as well as an index floor, usually with the floor being 0%. The safety comes from a Fixed Account that provides steady growth and from Indexed Account options that guarantee against market losses.

What is the Index Cap?

Maximum interest rate that is used in the calculation of the index credit.

What is the Index Floor?

Minimum interest rate that is used in the calculation of the index credit. The most common index floor is 0%.

What is an in Index participation rate?

The portion of the index change that is used in the calculation of the index credit. The most common participation rate is 100%.

Are premium payments tax deductible?

Is the death benefit income tax-free?

What is the S&P 500?

The Standard & Poor’s 500 Index (S&P 500) is an index of 500 stocks seen as a leading indicator of U.S. equities and a reflection of the performance of the large cap universe.

How is Interest Determined?

The credited interest rate is the index change multiplied by the index participation rate. This calculated value is then subject to the index cap rate and index floor rate.

For example let’s assume at the beginning of the year that you have $100,000 allocated to an Index with a floor of 0%, a cap of 12% and a participation rate of 100%. At the end of that year if the Index increased by 15% then earned interest rate would be 12% because of the cap. In this scenario the interest credited would be $12,000 and your new value would be $120,000. Then, in the next year let’s assume the Index went down 10%. The earned interest would then be 0% because of the floor.

What are the benefits of an IUL?

Indexed Universal Life (IUL) insurance shares the coverage and premium flexibility of other universal life policies, but the crediting of interest is very unique. Indexed interest is linked to the performance of an external index such as the S&P 500. The cash value increases are linked to positive changes in the equity index.

What if the index were to go down?

If the index stays flat or declines, you will still receive credited interest equal to the annual floor.

Indexed Universal Life insurance provides you the peace of mind of a death benefit protection, but also offers upside potential for your cash value accumulation which can be used towards many different financial needs such as income replacement, mortgage and other debts, supplemental college fund, and much more.

Given today’s economic realities and the awareness in knowing that taxes are likely to increase, this financial vehicle is more beneficial than ever before:

Tax-free death benefit
Tax-deferred accumulation
Tax-free distributions

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Wall Street


1. What if the insurance company fails or goes bankrupt?

That’s a good question. We looked at all the insurance companies that went under in the last few years, while the economy has been so bad, and discovered only one small life insurance company out of Kentucky went bankrupt. It was so small, we had never heard of it.

Typically, when insurance companies get into financial trouble, another insurance company will buy them out and pick up all the contracts. Remember, your policy is a contract, so the new insurance company is legally bound to honor the terms of the new contract.

If your company is not purchased by another, almost every state has a guaranty fund that handles life insurance company bankruptcies. This works like the FDIC, which insures against bank failures. The guaranty funds will pay your claims, particularly for your cash value, up to a certain limit if your insurer goes under. In most states, the maximum aggregate benefit for all claims is $300,000 for life insurance policies.

Also, the financial reserve requirement for life insurance companies is much higher than banks. That is why so many banks failed in the Great Depression and, by contrast, so few insurance companies met the same fate.

Finally, this is the reason we want to make sure we only deal with insurance companies that are financially strong with A ratings.

2. Can I choose how to invest my money?

Actually, the insurance company makes that decision. Here is how they do it: Let’s say your premium is $1,000 per month. The insurance company takes $950 of that premium and buys an investment that guarantees they will get back $1,000 at the end of the year. That is how they can guarantee that your cash value won’t lose money in a down year. 

They use the other $50 to buy options — specifically, calls — the right to purchase a particular investment if its price falls within a specific range. In good years, the $50 will provide some extra income — that is how they can get extra rates of returns on the product. In bad years, the options expire as money runs out and there is no extra return for the policy owner.

3. What happens if I can’t make a payment, lose my job, or face some catastrophe?

That is one of the great things about IULs — the premiums are flexible. First, there are a band of premiums, set between a minimum and a maximum premium. Obviously the more money you invest, the better it will do over time. So, one thing you could do is go to the minimum payment, and then, as your life improves, you can go back to a higher payment, or even dump in a load of cash if you get a bonus or sell your business.

Let’s say you have a year where you can’t make any payments at all. Depending on how long you have been in the product and how the market has done, that might be OK. We will run some illustrations for you and let you know where you stand.

At this point, we might run “bad case” scenarios for you. Depending on the client, we might show premiums paid for 10 years and then taking a four-year break and resuming premiums, or just paying for 10 years and then stopping. 

The number one thing to remember about IULs is that they are life insurance policies. 

4. What if Congress changes the tax benefits?

These insurance products used to have even better tax advantages. In those days, the wealthy would put in millions of dollars so they could have tax-free savings account. The IRS got onto this tax strategy and passed a law that limits how much can go into these policies. However, all the lucky people who had been socking money away managed to have their policies grandfathered in and kept their tax benefits.

Nothing is certain, of course, but we have never even heard of any potential regulations that would impact these policies, and the only conclusion we can come to is, most of Congress must have permanent life insurance.

5. Why aren’t more people doing this? Why haven’t I heard about this?

First, it takes a disciplined client  — the younger and the healthier, the better. They need to be good savers and willing to commit to a long-term saving strategy.

The only clients we have had who declined this product had no disposable income — they were living fist to mouth and couldn’t save anything. This is the wrong product for clients who don’t have an emergency fund or a steady stream of disposable income. 

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IUL policies are aimed at investors who want to participate at least to some degree in the expected growth of the stock market while taking less risk than they would by investing directly in the market.

While IUL is not right for everyone, there are certain circumstances where these policies can be particularly attractive, including:


Because insurance benefits pass to your beneficiaries tax free and avoid probate, life insurance is often used in estate planning strategies. 

An IUL policy can serve the dual purpose of a savings vehicle for retirement or some other goal while also passing on wealth to your heirs when you are gone.


If you have reached the limit of what you can contribute to retirement plans such as 401(k)s and IRAs, an IUL can enable you to set aside even more money for retirement in a tax-favored account. 


Retirement plans such as 401(k)s and IRAs typically require you to be 59 ½ before you begin withdrawing funds. 

Because IUL doesn’t have the same age restrictions, it can be used as a means of funding early retirement.


IUL can be used as part of a long-term strategy emphasizing insurance coverage initially and retirement savings further down the road. 

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Glass Buildings

How Do Loans Work?

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Indexed universal life insurance policies generally offer two types of policy loans. Though the language can be a bit intimidating to some, by the end of this introduction, you should have a solid understanding of what’s available and how the different loan options work.

Typically, indexed universal life insurance policies have two loan options. The first loan type is the traditional loan (sometimes referred to as the fixed loan option). The second loan type is the indexed loan (sometimes referred to as an “arbitrage” loan).

Traditional Loans
The biggest identifying characteristic to traditional loans is the adjustment that takes place to the cash values that back the policy loan. Most companies offer these loans with a fixed loan interest rate and adjust the interest rate credited on cash values that back the loan either to a rate slightly below the loan interest rate or peg it to equal the loan interest rate.

This loan option is sometimes called the “fixed” loan option, but that phrase can be misleading since not all traditional loans are fixed. It also implies that indexed loans will always have variable loan interest rates (not true).

Here's an example to help clarify the difference:

Let’s say a policyholder has $100,000 in cash value in his policy and decides to take out a $20,000 policy loan. The traditional loan option has a 3% interest rate and credits 2.5% interest to the cash that backs the loan.

The indexed derived interest rate is 11%.

The following will happen to the policy while the loan remains outstanding:

$80,000 of the cash surrender value and any increases in cash values that do not back loans will continue to earn the index derived interest rate of 11% for an interest increase of $8,800

The $20,000 loan will accrue $600 in interest annually and the policyholder can choose to pay or simply capitalize it by allowing the loan to grow by $600.
$20,000 of the cash value (the cash value that backs the loan) will earn $500 in interest and will continue to earn the interest rate of 2.5% as long as the loan remains outstanding

The total interest received on all cash values is $9,300

This example outlines a negative loan spread–the interest credited to cash values backing the loan is less than the loan interest rate. Not all traditional loans work this way. Some companies credit the same interest rate to cash values that back a loan as they charge in loan interest. This is often referred to as a wash loan.

If the example above used a wash loan instead of a negative loan spread, the net difference would be $600 credited to the $20,000 backing the policy loan instead of $500.

Indexed Loans
Indexed loans (also called arbitrage loans) have a non-direct recognition element to their functionality. This mean the life insurance company charges loan interest on the outstanding loan, but the interest rate credited to cash values that back the loan are unaffected by the outstanding loan and continue to earn whatever the index derived interest rate is.

Another example will help ensure understanding:

Let’s take the example above, but instead we’ll use an indexed loan. In our example, the indexed loan interest rate will be 6%. The following will happen:

The $20,000 loan will accrue $1,200 in interest annually and the policyholder can choose to pay this interest or simply capitalize it by allowing the loan to grow by $1,200.

All $100,000 will earn the 11% interest rate.

Total interest payments received on all cash values is $11,000.

This example, which shows index derived interest higher than the loan interest rate (or a positive spread) is a very favorable aspect of indexed policy loans.

It should be noted that indexed loan can also have negative spreads.

If we took this same example with an indexed derived interest rates of 1% for the year, total interest payments received would be $1,000. If that happened, the loan grows by $200 more than the cash value.

Indexed loans can have both fixed and variable loan interest rates, and whether the rate will be fixed or variable depends on the issuing company (i.e. some use fixed loan rates while others use variable loan rates).

If you have questions about how indexed universal life insurance might work for you, please reach out to us.

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How Does the Life Insurance Company Guarantee the Cap?

Hedging allows the life insurance company to perfectly meet it's obligations through a revenue neutral strategy.

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