Help Your IUL Clients Prepare for Their Annual Statements

An important part of selling an IUL policy is helping your clients prepare for what to expect when they receive their annual statement. Preparing your clients in advance will hopefully result in fewer unanswered questions when they reach their policy anniversary. We have provided the answers to a few of the questions clients typically have on their first annual statement.

  1. If the index increased, why am I not seeing any index interest credits?
    For life insurance policies, annual statements must be created the day prior to the anniversary date. On an IUL, index interest is not credited until the segment matures, which will occur after the anniversary date. This means your client will not have any index interest credits on their first statement.
  2. If there have been no index interest credits, why do I see a small amount of interest?
    There are two things that may account for the amount of interest your client will see on their first-year statement.

    • If the client has all or a portion of their accumulation value allocated to the fixed account, that interest is credited daily and is reflected on the statement.
    • If the client has all of their accumulation value allocated to the index interest crediting strategies, then the interest shown on the annual statement is what has been credited to the short-term holding account. When premiums are received prior to the 10th of the month, they sit in a short-term holding account which earns the same interest as the fixed account.
  3. Where can I find out what I’ve earned?
    After the anniversary date, your client can log on to the Customer Access Center or can contact the home office to find out their index interest credit. Keep in mind that index interest is not credited until the index segment matures, which is one year after it is created. If the client is paying monthly, quarterly or semi-annually, the index interest credits will only reflect the segments that have already matured.
  4. Can you explain what the charges on my statement are for?
    There are generally four types of charges on the statement: the premium charge, the monthly expense charge, the cost of insurance charge and the surrender charge. If the client has elected any optional riders, there may also be rider charges.

    • The premium charge is typically used to help pay for product research and development, sales expenses, the costs to underwrite and issue a policy, and state and local taxes.
    • The monthly expense charge is typically used to help pay for the insurance company operations. This helps make sure that the insurance company can keep running and will be there to assist clients in getting the benefits from their policy when they need it most. This includes, but is not limited to, client services staff, claims staff, actuarial staff, investment staff, and operational expenses.
    • The Cost of Insurance (COI) charge is typically used to help pay for the cost of the actual life insurance protection. This is based on the insured’s gender, attained age, risk class, and death benefit amount.
    • The surrender charge is the amount charged if the policyowner surrenders the policy before the surrender charge period is over. In order to remain profitable, the insurance company plans on a policy remaining in force for a certain amount of time. This charge is only assessed upon a surrender, as defined in the contract.

Planning Ahead
It may be helpful to discuss with new clients what their first annual statement will look like when you deliver their policy. That way, they will know what to expect when they receive their first annual statement.

You can also plan ahead for the questions your clients may have by reviewing this sample annual statement showing a policy that is paid annually.
 

Help Your IUL Clients Prepare for Their Annual Statements
 

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