Lower life insurance pricing from new mortality rates may not translate to better performing Indexed Universal Life (IUL) policies


Life insurance rates have just fallen to their lowest level in years. This is excellent news for people who are looking to buy term life insurance or any policy where maximizing death benefit for the lowest cost is the primary goal.

Why are life insurance rates at a low?

It is not difficult to pinpoint what led to the change. Individual life expectancy has steadily increased for decades, having a profound effect on life insurance company financials. In the United States, mortality rates have decreased with roughly 1 or 2 percent per year beginning with 1990. Improvements in mortality rates account for lower expected rates.

It is not good news for Indexed Universal Life (IUL) policies

While insurance premiums cost less in the current fiscal year, it is not all good news. According to the experts at The Yale Tribune, there will be adjustments in the application of the MEC rule. If the funding exceeds federal tax law limits, the life insurance policy is not considered valid anymore. MEC testing will thus be disadvantageous for Indexed Universal Life Insurance (IUL) policies designed to maximize cash value by minimizing the death benefit and associated fees.

What does this mean? Well, the person who owns the insurance policy must carry more death benefits regardless for any given amount of premium attached to the life insurance policy. The death benefits refer to the amount that will be paid on a tax-free basis to the policy beneficiary the moment that the insured person passes away. The amount of death benefit corresponds directly to the amount of fees in an IUL policy. This can potentially ruin someone’s retirement.

A few thoughts on Indexed Universal Life (IUL) insurance

An IUL policy is designed so as to help a person maximize cash value and generate tax-free income for retirement. There are alternatives to this insurance policy. So, it is worth taking the time to understand all the pros and cons of indexed universal life (IUL) insurance.


  • Bigger potential returns – The policy holder gains exposure to equity indexes upside without having to incur market losses. Ideally, the surrender value grows over time outrunning the fees, and the person can take out an insurance policy loan.
  • Flexible premiums – The policyholder can pay more or less every month unlike other types of insurance policies that have rigid premium structures. With Indexed Universal Life they can customize the policy premiums to their ongoing cash flows.
  • No required distributions – It is not required to take annual minimum distributions. He policyholder can leave the fund in the account. The cash amount grows tax deferred and the person is not obliged to take out money.


  • Growth restriction – In spite of the growth potential associated with indexed universal life insurance, there is a limit to how much a person can earn. It may not be possible for a person to attain their profit goal.
  • The total cost paid may not outweigh the downsides – It might be a good idea to consider alternative investment ideas.

Not everyone is better off with such an insurance policy. It is important to carefully consider the pros and cons of IUL before making a final decision. The life insurance policy is as unique as the person who owns it.


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