IUL Commission

[Sheryl J Moore]

All universal life products (fixed, indexed, and variable) have two components to the compensation. The first is the target premium amount. The second is the payout percentage. So, as I inferred, it is a pretty meaningless metric when people can use the two components in a type of "shell game."

 

[Life Hawk]

Don't do IUL's and never plan on it at this point. Too much discussion around policies blowing up. Too many unknown future factors for me to want my name on them. Just a few days ago a certain discussion was occurring (not on the forum) regarding an individual with memory issues with a IUL policy cannibalizing itself. Simple fix was to change ownership and drop accumulated cash into a simple annuity.

That most likely wont happen because agent didn't fully understand how to proceed. Gray areas always fall to the client's best interest in my book. Something I could always stand by in an investigation.

That said, I can see people using this product, but again the complexity on the back end of the product in an unknown future is too risky for most, and truth be known, clients rarely if ever fully understand the possible impact of that purchase.

 

[Richard Caridi]

40%-70% of annual premiums

True. It can fluctuate quite a bit depending on the amount & age of the client.

 

[ATM]

All universal life products (fixed, indexed, and variable) have two components to the compensation. The first is the target premium amount. The second is the payout percentage. So, as I inferred, it is a pretty meaningless metric when people can use the two components in a type of "shell game."

There are three components, the two you listed and the third being the actual amount of premium paid.

You could have a target premium of $10,000. A payout rate of 90% and an actual premium of $6,000.

In my example the commission is $5400.

If the premium were $25,000, the commissions would be roughly $9,000 with some amount paid on the premium in excess of target.

 

[Allen Trent]

There are three components, the two you listed and the third being the actual amount of premium paid.

You could have a target premium of $10,000. A payout rate of 90% and an actual premium of $6,000.

In my example the commission is $5400.

If the premium were $25,000, the commissions would be roughly $9,000 with some amount paid on the premium in excess of target.

1 item before target impacts it even more..............the face amount. in your example of someone paying $6,000 into a $10,000 target policy, that face amount was improperly designed if truly a max-funded type of case. the face should have been about 67% lower, causing the target to be $6,000. Target is merely a compensation topic & no correlation to performance of policy.

Also, many of the policies have embedded policy fees for the 1st 10 years to cover the cost to underwrite, issue, pay commission & overrides. Having the face be 67% higher than needed also caused those 1st 10 years of policy fees to eat up a greater portion of the premiums/cash values. I have seen agents illustrate a higher face & then lower in 1 or 2 years & act like it had no bearing on the client as it was only a tiny bit more ART COI fees, but they fail to realize the added policy issue fees could add up to many thousands of dollars in actual charges that dont drop when face is reduced as they are based on the face at issue. Combine that with the lost index credits on those added fees & it is a problem for the consumer they dont realize they had. Lastly, is the agent really going to come back & lower the face amount later? Doubtful

 

[ATM]

1 item before target impacts it even more..............the face amount. in your example of someone paying $6,000 into a $10,000 target policy, that face amount was improperly designed if truly a max-funded type of case. the face should have been about 67% lower, causing the target to be $6,000. Target is merely a compensation topic & no correlation to performance of policy.

Also, many of the policies have embedded policy fees for the 1st 10 years to cover the cost to underwrite, issue, pay commission & overrides. Having the face be 67% higher than needed also caused those 1st 10 years of policy fees to eat up a greater portion of the premiums/cash values. I have seen agents illustrate a higher face & then lower in 1 or 2 years & act like it had no bearing on the client as it was only a tiny bit more ART COI fees, but they fail to realize the added policy issue fees could add up to many thousands of dollars in actual charges that dont drop when face is reduced as they are based on the face at issue. Combine that with the lost index credits on those added fees & it is a problem for the consumer they dont realize they had. Lastly, is the agent really going to come back & lower the face amount later? Doubtful

Could be lots of reasons the face is what it was in my example. The plan could be to double the premium in year two and beyond to match the owners cash flow needs in a max funded IUL.

Or it could be that it is a GIUL and the goal is death benefit.