Educational Planning Tool
IUL Funding and Illustration Calculator
Explore how funding, policy charges and illustrated crediting assumptions may affect an indexed universal life insurance policy over time.
Explore a Hypothetical IUL
See how premium funding, hypothetical crediting rates and entered policy charges may affect accumulation over time.
What does the index-crediting floor mean?
A floor generally limits negative indexed interest crediting. It does not mean that the policy’s cash value cannot decrease. Policy charges, loans, withdrawals and other contract activity may still reduce policy values.
Review a Carrier Illustration
Enter figures from an official illustration to better understand its funding design, assumptions and projected policy values.
Values at a Selected Policy Year
Understanding the Funding Categories
- Underfunded
- Premiums may be low relative to the intended policy design, leaving less money available for accumulation after policy charges.
- Properly funded
- Premiums are structured to support the intended balance between life-insurance protection and potential accumulation.
- Overfunded
- Premiums exceed the basic design or target amount while remaining within applicable policy and tax limits, generally emphasizing cash-value accumulation.
- Potential MEC concern
- Funding beyond applicable tax limits may cause the policy to become a Modified Endowment Contract. The actual limit must be confirmed through a current carrier illustration and cumulative testing.
How to Use the IUL Calculator
This educational IUL calculator helps you explore how funding, policy charges and indexed-crediting assumptions may affect an indexed universal life insurance policy. You can use it to learn basic IUL concepts or enter figures from an actual carrier illustration for a more organized review.
An IUL is a life insurance contract, not an investment account. Its primary purpose is to provide a death benefit. Depending on the policy’s design, funding and performance, it may also accumulate cash value that can provide additional financial flexibility.
Learn How an IUL Calculator Explains Funding
The hypothetical mode lets you enter an annual premium, funding period, projected crediting rate and estimated annual policy charges. It then shows simplified accumulation examples using several hypothetical rates. These results are not quotes, guarantees or carrier-illustrated policy values.
You may also enter a design or target premium and a maximum non-MEC premium to compare different funding levels:
- Lower-funded: The planned premium is materially below the entered design premium. This may leave less premium available for cash-value accumulation after policy charges.
- Near the design premium: The planned premium is reasonably close to the entered design premium.
- Higher-funded: The planned premium is above the entered design premium while remaining below the entered maximum non-MEC premium. This may place greater emphasis on cash-value accumulation.
- Potential MEC concern: The planned premium exceeds the maximum non-MEC premium you entered. The carrier must determine the actual premium limit.
These descriptions are educational comparisons, not conclusions about whether a policy is properly funded. Age, health, death-benefit structure, policy charges, underwriting and carrier rules can all affect the allowable premium and policy performance.
Review an IUL Illustration
The IUL calculator’s illustration-review mode organizes important figures from a carrier illustration, including planned premium, target premium, maximum non-MEC premium, account value, cash surrender value and projected death benefit. It also records assumptions such as the illustrated crediting rate, floor, cap, participation rate and loan rate.
The account value is the policy’s accumulated value before certain deductions. The cash surrender value is the amount shown as available if the policy were surrendered at that point. A difference between the two may reflect surrender charges or other policy adjustments.
For additional background, the National Association of Insurance Commissioners explains how life insurance illustrations distinguish guaranteed and non-guaranteed elements and support informed policy comparisons.
Understanding IUL Crediting Assumptions
An IUL floor generally applies to indexed interest credited during a crediting period. A 0% floor does not mean the policy’s total cash value cannot decline. Monthly deductions and other policy charges may continue even when no indexed interest is credited.
The cap limits the indexed rate credited under a particular strategy. The participation rate determines how much of the index change is considered before other limits are applied. Caps, participation rates, spreads and available crediting strategies may change as permitted by the insurance contract.
Why Ongoing Policy Reviews Matter
An original illustration shows assumptions—not a promise of future performance. An in-force illustration can help evaluate how an existing policy is performing compared with its original expectations. Periodic reviews are especially important when premiums change, loans or withdrawals are taken, credited interest differs from the illustration or insurance costs increase.
Policy loans and withdrawals may reduce cash values and death benefits, increase the possibility of a lapse and create tax consequences. Before changing funding, taking policy values or surrendering coverage, review the current policy information with the insurer and appropriate professional advisers.
Discuss Your Results With Jay
This IUL calculator can help you prepare better questions, but it cannot determine whether an IUL is suitable for you. Learn more about life insurance, explore additional insurance resources, or contact Jay Cohen for a personal insurance conversation.
This tool is provided for general educational purposes only. It is not a carrier illustration, insurance quote or individualized financial, investment, tax or legal advice. Actual policy values, charges, crediting methods and premium limits are determined by the issuing insurance company and the specific policy contract.