It’s always good to know the rules for getting money back, so I compared surrender charges for indexed universal life (IUL) carriers. Surrender charges decrease on a declining schedule. For the carriers I compared, it takes between 10 to 20 years for those charges to completely go away. Not surprisingly, Lincoln and Penn Mutual were among those most favorable.
Penn Mutual is the best: no surrender charges after the 9th year, also no surrender charges in excess of target premium.
Target premium is a premium designed maintain a permanent policy for life. Mind you target is a guidepost for keeping the policy in force, how the policy performs may require more or less premium. With Indexed Universal Life one strategy is to over fund the policy above target to build additional cash value. Of the carriers I surveyed, only Penn Mutual and Old Mutual did not require a surrender charge on that portion of the premium.
For example, as in prior comparisons: male age 44, over funding an Indexed UL with $25,000 in premium for 20 years in order to generate tax free retirment income in the form of policy loans. With Penn Mutual this is a $590,000 increasing face amount policy, and the given target premium is $7,918 a year, but by over funding it with $25,000 in premium, just under the IRS limit for a Modified Endowment Contract (MEC), the policy builds the maximum permissible tax free cash value. That amount between $7,918 and $25,000 would not be subject to surrender charges at any time with Penn Mutual.
The least amount of surrender charges in the shortest period of time is a distinct advantage for an Indexed Universal Life in case there is a change in plans.
Sean Drummey
Contact for a free quote
Phone: (910) 328-0447
Email: spdrummey@gmail.com