IUL know-how: The index crediting game

Since the advent of AG 49, many carriers have tried to find creative ways to increase the illustrative crediting rate of their products.

Essentially, illustrations are required to show the basic costs and benefits in an insurance product with projections of performance over time. Key to these projections is the interest crediting rate. The level of the rate is important, but the timing and method of interest crediting is critical.

One carrier might apply expenses to premiums paid annually and credit interest on the net remainder. Another might charge expenses monthly and credit interest once a year on the average account balance. Some carriers have hard-to-find charges that may go overlooked by clients; these charges affect the interest rate that is actually credited to the account balance. Though there are few that manipulate illustrations in this manner, you should know they exist and understand the fine print.

KEY CONSIDERATION: Transparency is key. Generally, it’s best to identify a policy with a straightforward and simple crediting method. For over 15 years, we've assisted countless advisors to find suitable crediting methods to help address their clients' biggest needs. Call us at 866.866.7050 or check out our in-depth IUL report for insights on crediting rates, AG 49, multipliers and more.