Lapse year at guaranteed rate
The single most important number on the document. If it’s before 90, ask why.
Foundations · The document
How to read an IUL illustration: the five pages that tell the truth
An IUL illustration is thirty pages designed to be skimmed to one: the non-guaranteed accumulation column. The honest read goes the other way. Here are the five pages to open first, in order, and the question each one answers.
Who this is for: Anyone holding an IUL proposal and unsure which numbers to trust.
Page one: the guaranteed column
This shows the policy at the floor crediting rate with maximum charges — the contractual worst case. Look for the year the cash value hits zero and the policy lapses at your planned premium. If that year falls inside your life expectancy, the funding plan is too thin. Everything else in the illustration is a scenario; this page is a promise.
Pages two through five
The non-guaranteed column uses an illustrated rate that regulators cap but no carrier guarantees; treat it as an optimistic scenario, not a plan. The cost-summary page shows cost of insurance rising into your 70s and 80s — check whether cash value growth is expected to outrun it. The loan pages show how any income stream is being generated: fixed loans, participating loans, and what rate assumption sits underneath. And the policy-data page lists the current cap, floor, participation rate, and the contractual maximums — the dials the carrier can turn.
The essentials
What actually matters here
Illustrated rate ≠ expected return
Regulators limit what can be illustrated; nothing about the cap guarantees the rate. Run a lower rate and see what survives.
Loan assumptions can flatter anything
A participating loan assumed to credit more than it charges is “positive arbitrage” — ask what happens if crediting underperforms the loan rate.
IUL can genuinely fit when…
- The policy survives on the guaranteed column at your premium
- The funding is well above minimum
- The loan pages make sense to you
- A lower illustrated rate still leaves the policy in force for life
Slow down when…
- You were only shown the accumulation page
- The income stream depends on positive loan arbitrage
- The illustrated rate is at the regulatory maximum
Straight answers
Questions people actually ask
What is the guaranteed column in an IUL illustration?
The projection of the policy at the contractual floor crediting rate with maximum allowable charges — the worst case the carrier promises to honor. If the policy lapses in that column during your expected lifetime at your planned premium, the design depends on optimistic assumptions to survive.
What illustrated rate should I use?
Regulators cap the illustrated rate based on the product’s cap and historical index data, but that maximum is not a forecast. A sound practice is to ask for the same design run at a meaningfully lower rate and confirm the policy still stays in force for life. If it only works at the maximum, it doesn’t work.
What does “positive arbitrage” mean in an IUL loan illustration?
A participating (indexed) loan assumes your borrowed cash value keeps earning index credits while you pay loan interest. If the assumed credit exceeds the loan rate, the illustration shows the loan making money — “positive arbitrage.” In years when crediting is below the loan rate, the opposite happens and loan balances grow faster than cash value. Ask to see that scenario too.
Honest, or not at all
See whether IUL actually fits your situation
Tell us a little about your goals and we'll show you the honest picture — including the guaranteed column, the real costs, and whether term or whole life does the job better. We're paid the same either way, which is why we can tell you the truth.
- We compare IUL against the simpler options first
- Illustrations explained line by line, guaranteed column first
- Your information is never sold