If you missed the first two webinars, you can still watch them on demand. In Week One, we covered an introduction to Indexed Universal Life—what it is, how it works, and why it exists. In Week Two, we discussed how to position IUL in your sales conversations, how to present it, and how to answer common objections such as the lack of a 100% guarantee. We also covered how to sell IULs to business owners and to individuals looking to protect their families.

This week, we’re focusing on how to handle the IUL skeptic. That skeptic might be you, your client, or both. There is a stigma around Indexed Universal Life, and today we’re going to address it directly.

Dylan, thank you for joining us again. I also want to congratulate our newly promoted Regional Sales Manager, Kevin Bay Tripp. Unfortunately, Kevin isn’t feeling well today, so we wish him a speedy recovery.

To recap from Part Two, we discussed “no life guarantees, no worries.” We explained that guarantees shown on illustrations—whether 10, 15, or 25 years—assume a worst-case scenario where the index performs at zero year after year. We talked about proper funding strategies, including paying target or maximum funding levels, to stay ahead of cost of insurance and take advantage of upside potential.

We also discussed positioning IULs for business owners using golden handcuff strategies to recruit, retain, and reward key employees. For families, we talked about combining life insurance protection with a cash value component that can later supplement retirement income.

Let’s take a step back and talk about how Indexed Universal Life came to be.

The original form of life insurance was whole life, introduced in the United States in the 1840s. Whole life provides guaranteed premiums, guaranteed death benefits, and guaranteed cash values. Some policies include dividends and paid-up additions. Because it offers guarantees to age 100 or 120 and provides cash value growth regardless of market conditions, it is one of the most expensive forms of life insurance.

Around 1980, universal life was introduced as a flexible alternative to whole life. At that time, interest rates were much higher—often 8% to 11% or more. Premiums grew within the policy, covering costs of insurance. As interest rates dropped, many policies became underfunded, leading to lapse notices and negative experiences for policyholders.

That led to the introduction of guaranteed universal life, which focuses on guaranteeing the death benefit as long as premiums are paid, regardless of cash value performance. However, those guarantees can be lost if cash values are accessed.

In the mid-1990s, Indexed Universal Life was introduced. Like traditional UL, it offers flexible premiums and adjustable death benefits, but interest credits are tied to market indices, most commonly the S&P 500. IULs offer higher growth potential, downside protection, and stronger guarantees, making them a compelling solution when designed properly.

Now, let’s get into some of the mechanics that often confuse or concern IUL skeptics.

Participation Rates

Dylan, let’s start with participation rates. What are they, how do they work, and why do they matter?

Participation rates act like a multiplier. If an index has a 150% participation rate and the index grows by 10%, the policy would be credited 15%. Participation rates increase upside potential, but they only matter if the underlying index performs well. A high participation rate doesn’t help if the index returns 0% or 1%.

Some products offer participation rates below 100%. While those can still work depending on the cap, most competitive products today offer participation rates of 100% or more.

Caps

Caps represent the maximum return that can be credited in a given year. If the cap is 10% and the index grows by 14%, the policy is credited 10%. Caps help insurers manage risk, especially in years with strong market performance.

Cap rates fluctuate over time based on market conditions, interest rates, and economic factors. That fluctuation is normal and should be expected.

We reviewed historical data from Ameritas’ Excel Plus IUL and compared it to the newer Growth IUL. While caps have declined over time due to market conditions, the long-term cap gap between older and newer products remains relatively small, which is important for long-term policy performance.

Floors

Floors define the minimum return credited to the policy, most commonly 0%. This is where the phrase “zero is the hero” comes from. If the market drops 10%, the policy is credited 0% instead of experiencing a loss. Gains are locked in annually, and previous growth is not lost during downturns.

Some products also offer guaranteed minimum returns, such as 2% or 3%, or look-back guarantees that true up performance over a set period. These features can provide additional stability early in the policy.

Illustration Rates

Illustrating at 6%, 7%, or 8% is generally reasonable, given the historical average of the S&P 500. At Ameritas, illustrations are run at 5.92% to remain conservative. If something looks too good to be true, advisors should stress-test it by lowering the illustrated rate and comparing it to other products.

Advice for IUL Skeptics

For advisors hesitant to sell IULs, the key is preparation and education. Build emotional rapport with clients by understanding their concerns: death benefit protection, health risks, retirement income, liquidity, and taxes.

Once those concerns are identified, you can confidently present IUL as a solution that addresses multiple needs. Ask permission to show an illustration. Most clients appreciate solutions tailored to their concerns.

Point-to-Point Crediting

Point-to-point crediting measures index performance from one date to another, typically over a one-year period. The index’s value at the start and end of that period determines the credited interest, regardless of market volatility during the year. After each period, gains are locked in, and the cycle resets.

Some products offer two-year point-to-point strategies with higher caps, but they come with trade-offs. Advisors can mix strategies and adjust allocations annually.

Final Thoughts

Down years happen, but markets historically rebound. Because IULs protect against losses and lock in gains annually, a down year can actually set the stage for a strong rebound year.

Advisors should do their homework, use conservative assumptions, and compare multiple products. If you ever want help stress-testing an illustration, I’m happy to do that for you.

Next week, in Part Four, we’ll dive into the full Ameritas story, including product specifics, index options, and industry-leading living benefits. That session will conclude our Indexed Universal Life Sales Academy.

If you have questions, feel free to reach out to me directly. I’m available to run illustrations, provide resources, and support you however I can.

Thank you for your time, your partnership, and your attention. Make it a great day on purpose, and we’ll talk soon.