Compare the costs of an IUL contract with either a hypothetical taxable investment or an alternative contract. |
Mr. & Mrs. Prospect, on the left I've imported an IUL illustration specific to your particular situation.What we see here are the plan premiums along with the annual costs associated with this contract. In the middle, we are illustrating a hypothetical investment alternative that receives the same cash inflows as the IUL contract - that's the plan premium. We then apply an assumed historic market rate of return, tax rate, management fee, and potential insurance costs for providing similar death benefit coverage as the IUL contract. Finally, on the right side, we compare the policy costs and investment costs side-by-side. It appears the IUL policy becomes less expensive to own in year XX. |
IUL Policy costs are taken directly from the policy illustration. The hypothetical investment values are calculated as follows: Plan Premium = IUL Policy Premium. BalanceBOY = prior year balance + Plan Premium. Avg Return = market return selected in the investment assumptions. Act Gains = BalanceBOY * Avg Return. Inc Tax = Act Gains * tax rate selected in the investment assumptions. Mgt Fee = (BalanceBOY + Act Gains) * management fee selected in the investment assumptions. Term Cost = term costs selected in the investment assumptions. Total = BalanceBOY + Act Gains - Inc Tax - Mgt Fee - Term Cost. Policy Cost = Cumulative Policy Total Invest^ Cost = Cumulative Investment^ Total GT Amt (Grand Total Amount) = Policy Cost - Invest^ Cost ^ When comparing two policies, the "Invest Cost" column is replaced by a similar "Policy B Cost" column) |