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Avoid these mistakes when selling IUL.

Picture of Eric Estrada

 

Indexed Universal Life (IUL) insurance is a versatile product that offers both death benefit protection and the potential for cash value accumulation tied to the performance of a market index. However, selling IUL policies requires a deep understanding of the product’s complexities and careful communication with clients. To help life insurance agents succeed in this area, we’ve identified the top five mistakes to avoid when selling IUL policies.

Top Mistakes to Avoid

  1. Overemphasizing Market Returns: Agents may oversell the potential for high returns by focusing too much on the market index performance, without properly explaining the caps, participation rates, and fees that can limit the actual credited interest.

  2. Underestimating Policy Costs: Failing to clearly explain the various costs associated with IUL policies, such as mortality charges, administrative fees, and surrender charges, can lead to clients being surprised by the impact on their cash value growth.

  3. Inadequate Stress Testing: Not illustrating how the policy performs under different scenarios, especially low or no returns, can give clients unrealistic expectations about the policy’s long-term sustainability and potential for lapse.

  4. Ignoring the Importance of Proper Funding: Not emphasizing the need for adequate premium payments to keep the policy in force and to maximize the benefits can result in underfunded policies that underperform or lapse.

  5. Misleading on Tax Benefits: While IUL policies do offer tax advantages, some agents may oversell these benefits without clarifying the conditions under which they apply, such as the need to keep the policy in force for a long period to avoid tax penalties.

 

Selling Indexed Universal Life insurance effectively requires a balanced approach that carefully manages client expectations and thoroughly explains the product’s intricacies. By avoiding these common mistakes, agents can build trust with their clients and ensure that they are providing a valuable financial product that meets long-term needs. Remember, the key to success is education—both yours and your clients’.