Selecting the best cash value life insurance policy is a difficult task involving a number of complicated concepts. However, because the amount insurers credit to cash values on IUL policies is a critical element of the overall cost of the protection, one primary area of focus should be how the company determines the amount it credits to cash values. The amount that insurers credit to cash values each year depends on four factors:
- The expenses insurers charge against the policy
- The mortality charges insurers assess against the policy
- The net investment yield earned by the insurers on their portfolio of investments
- The method insurers use to allocate interest to various blocks of policies
The cash value at the end of any given year is equal to the cash value from the end of the prior year plus premiums (or less withdrawals) paid during the year less expense and mortality charges and plus interest credited. The annual report usually will explicitly show the expense and mortality charges and the interest credits each year.
Reproduced with permission. Copyright The National Underwriter Co. Division of ALM