How Much Does A Max Funded IUL Insurance Policy Cost? - YouTube

This makes you money. It doesn't cost you money. In this episode, we are going to

address the question how much does a max funded IUL, index universal life

insurance policy actually cost.

I'm Doug Andrew and I've been doing this for more than 45 years. In fact, way back

in 1974 when I began helping people optimize their financial assets and

minimize taxes and empower their true or what I call authentic wealth, I actually

had a series one securities license. And by 1980, I was responsible for over 3000

clients and 13 Western states. But these clients were never happier than when I

got them out of the market with the whipsaws and so forth and put them into

max funded indexed universal life insurance came out in 1997. But in 1980,

when EF Hutton who is credited with being the brainchild behind Universal

Life, came out with it it wasn't whole life, it wasn't term. It was universal

life. It was universally applicable on both ends of the spectrum. If you want a

death benefit for a lower premium, then maybe whole life at that point. You could

get Universal life for the most death benefit for the least premium. But Hutton

said, "Wait a minute. Why don't we do the opposite? Why don't

we take the least amount of insurance we can get away with and put in the most

premium?" And this thing turns into a cash cow.

It was brilliant because it accumulates your money tax-free. Later, you're able to

access that money for retirement income or any other purpose

totally tax-free. And when you ultimately die it blossoms in value and transfers

tax-free. No other vehicle in the Internal Revenue Code does that.

Municipal bonds don't do that, a Roth doesn't do that. And so, when people ask

what is it cost, sometimes I go, "That's the wrong question." How much does it make

you? In other words, a business owner understands that if

you invest $100,000 on an employee but that employee makes you

an extra $500,000, was that a cost or an investment? And so,

when you max fund a universal life policy and then in 1997

and my preference became indexed universal life what is known as IUL,

what you're trying to do is get the cost down as low as possible as soon as

possible. So, generally within 10 years, the cost of the insurance that the IRS

says has to be there under tax citations TEFRA, DEFRA, TEMRA. The cost of the insurance

is down around 1% or so. It means that if you're earning 11, your

netting 10. If you earn 8, you're netting 7. If you earn like some years, our

clients have earned 16, they've netted 15. Or if they earn 25,

they netted 24. So, in other words, one of those percentage points

paid for the insurance and all the fees because the IRS said if there's not

insurance attached to this under the guidelines of TEFRA, DEFRA and TEMRA tax

citations, then it's not going to be tax-free. But to me, that's not a cost.

It's a benefit because i'm netting 10%. I'd have to be earning 15%

in a tax deferred account like an IRA or 401K to be able to net 10%

after tax. And after fees, I'm only netting 9. In an IUL, I only

have to earn 10 to net 9 and I've done that predictably for 25

years. So, let me share with you something most

advisers don't even understand. So, under TEFRA and DEFRA tax

citations, a lot of advisers, even insurance agents don't understand that

when you take the least amount of death benefit to allow the greatest aggregate

premiums to be put into the policy, when you do that, you have the choice of

having your cash and the money you're earning, the interest you're earning on

that cash value qualify as part of the death benefit. So, if I start out at age

60 and I create a max-funded IUL that will accommodate $500,000,

I can't put that in all at once without

violating TAMRA. But I can put in maybe about 100 grand a year. And so, it's going

to take a little while for that to build up to be able to have the cost of the

insurance be 1% or less. But if I put in 500,000. And in a 60, the

minimum death benefit required is a million two hundred fifty thousand. Once

I have 500,000 in there, the actual insurance, the the risk to the

insurance company is only the remaining 750,000. But if

my 500,000 in 7 years at 10% or in 10 years at7%

which is the low and the high of what I've earned four years on mine. That

means my 500,000 would double to a million. Now, the insurance

company is only at risk for 250,000. They're only going to charge

me for 250,000 of risk. Well, pretty soon, most of my clients

who have used IULs within 10-12 years the amount of

cash in the policy exceeded the death benefit required under Tefra and Defra. And

that allowed the insurance policy now to increase at five percentage points above

my cash. But now the insurance has gotten cheaper as I've gotten older because the

amount of insurance they're charging me for is less even though the cost per

thousand of insurance goes up when you get older. You're paying for way less. I

pay one twentieth the amount of money for insurance that I did 30 years ago

because I'm earning so much interest on my policies. The cost of the insurance

now is only draining out maybe one tenth of 1%. But on the average in the

first 10, 15, 20 years, it's usually within one percentage point of

the gross rate of return on the IUL. So, what does that mean? That means that

if you were looking at the overall cost when people say, "How much does that cost?",

normally I will show people like a ledger and I'll say, "Now, let me compare

this to a tax-deferred IRA or 401K in the market, in the mutual fund or to an

annuity or to this vehicle or municipal bond, whatever." So I could compare to all

these vehicles. And I would say, "Now, let me cover up what this one is over here.

Ahich one would you choose and they would see that the accumulation was

usually quite a bit better at age 60 or 65 when they hope to retire in the IUL."

They didn't know it was in IUL. But then when I would show them income coming out

tax-free. That you only had to pull out $100,000 to net a

100,000. In a tax-deferred IRA or 401K, you had to pull out

150,000. Pay tax of a third to net 100,000. And they

would see the IRA or 401K totally run out of money in 11 years.

Maybe at age 76. And the IUL lasted to 120. Pulling out a

100,000 bucks a year tax-free. And they would add that up. And if you lived in

extra 20 years, it was an extra million dollars of income. Or 2 million

dollars of income. And then I would say, "Well, this is what it is." And I've

uncovered and I said, "It has a death benefit. This is an insurance contract." "Oh,

I don't need insurance." I go, "What does that have to do?" Make me the

beneficiary then. "Well, what does that cost?" I'm going, "What do you mean what

does it cost?" Look at what it did. Didn't cost you anything. It made you money. It

didn't cost you money. I mean, if I were to go to my employees and say, "Hey, we

have some additional benefits this year for all of you." We have free life

insurance. How much would you like? Now, predictably, they go, "As much as I can get?"

Yeah, see we don't object to insurance benefits. We object to paying for them. So,

the way I look at it, if I earn 11 a net 10 or if I earn 8 and net 7, that

one percentage point is not a cost. That is money that would have gone out the

window in unnecessary income tax if I had an IRA or 401K. I'd have to be

earning 12 to net 8 in a 33% bracket. That's money that would go out

the window in taxes. Plus another 1% in fees. So, why would you have that fee

incurred taxes and fees when the insurance is actually paying for itself?

So, it's not a matter of what does it cost. What does it make

you? So, if you want to see how to make an insurance contract get cheaper as you

get older, you must read this book The Laser Fund. It's 300 pages containing

charts graphs and explanations. You'll understand this and you'll see how it

works in real life with 62 actual client stories on the flip side. And so, go to

laser fund.com and I'll pay for the book and send it

out to you. It's it's a free gift. You pay five ninety five shipping and handling

and start to empower yourself with answers to questions like this and many

others that we post on this YouTube channel.