With no further ado… The first of our top IUL companies of 2018 listed alphabetically is: Columbus Life
Click to see the summary and highlights of Columbus Life as a Top IUL Carrier of 2018We strongly consider using Columbus Life Insurance Company’s Index Explorer Plus product for clients who need the maximum early access to their premium payments and cash value growth during their accumulation years. Using their “Enhanced Cash Value Rider,” Columbus often produces the most available early cash value when comparing these best performing IUL policies side by side. Columbus Life’s Indexed Universal Life policy boasts one of the highest 1-year S&P 500 caps in the industry (13% as of April 2018), not to mention the most favorable 1-year uncapped strategy that tracks the S&P 500. Columbus’s unique uncapped methodology gives you full participation on the first 7% of the S&P 500’s annual growth, and then unlimited participation after 12%. Most other uncapped options erase the first 5% of index growth. Columbus gives you the ability to swing for home runs without having to give up singles and doubles in any given year. Columbus also has a locked 6% loan rate that allows you to fully participate in either index strategy describe (even on the money you borrowed). You have the ability to mix and match these strategies and change your allocation every year. Columbus Life’s Index Explorer Plus also has the highest fixed crediting rate (4.6% as of February 2018) when you want a portion of your cash value to simply earn a fixed interest rate rather than tracking an index. Many companies that offer Indexed Universal Life have a chronic illness rider with no up-front cost that allows some sort of tax-free advance on your death benefit if you are deemed to be chronically ill. Of all the hybrid life insurance policies offering long-term care type protection, Columbus Life’s Index Explorer Plus comes in second for us since it blends superior performance with strong protection. The exact nature of the benefits available will vary by the state you’re in, but let’s just say that the protection is rather robust for a policy provision that incurs no cost or drag on policy performance until the provision is exercised. The Index Explorer Plus from Columbus Life actually has different illness/injury triggers that allow for varying levels of tax-free advances of your death benefit depending on the nature and severity of your malady. Sometimes you can even qualify for a large lump-sum distribution while still preserving a reasonable amount of death benefit depending on the situation. Also, no ongoing receipts are needed when accessing the tax-free cash during lifetime. Records from the doctor stating the severity of the illness/injury is all that is needed when making this kind of claim. This type of hybrid life insurance / long-term care coverage can be especially important when it comes to life insurance for businesses. Key Person life insurance and Buy-Sell Agreements often only protect against premature death. However, the business is still at risk if the insured becomes too sick or hurt to keep working. Since people are more likely to become chronically ill or critically injured than they are to die, these types of hybrid life insurance policies can help protect entrepreneurs on both fronts. To be clear, there are other policies that have more robust protection against these long-term care risk. However, it’s rare that you can find one of the best performing IUL’s still having solid long-term care type riders built into the policy with no up-front costs. Minnesota Life
Click to see the summary and highlights of Minnesota Life as a Top IUL Company of 2018Minnesota Life Insurance company has a solid blend of all the features we like to see in an indexed universal life policy. Minnesota Life is the second largest company in our reviews of the top 5 best performing IULs. They have a history of being one of the key innovators and ongoing leaders in the Indexed Universal Life industry, and they have no signs of letting up. Even though Minnesota Life has always had one of the best performing indexed universal life policies, they were not even a consideration of ours as a top IUL carrier before 2014. Then they adopted a participating loan rate locked for life at 5%, making them currently tied for the lowest in the industry with locked loans. A 5% locked loan rate helps indexed universal life policyholders who know they will want to borrow against their IUL’s cash value to buy real estate, build businesses, or simply maximize future retirement distributions via policy loan. They can peg that borrowing rate and still track the S&P 500 on this loaned money up to a current cap of 11.75% (as of April 2018). Also as of 2014, Minnesota Life was the first company offering an option to pay any portion of your policy’s death benefit in installments over a timeframe of your choice from 10-30 years. By electing this death benefit payout structure at the policy’s onset, Minnesota life provides ongoing policy credits that offsets a sizable portion of your indexed universal life internal policy charges. Minnesota Life Insurance Company currently offers this feature on both their Omega and Orion products. [Pro-Tip]: For older insureds, smokers, and people that end up getting poor health ratings, this provision can substantially reduce what were once prohibitive costs inside their Index Universal life policies. Minnesota Life is also known for coming up with some very unique crediting strategies that give you the opportunity for strong cash value growth. They are the only carrier in our group offering a 16% cap on a 1-year blended index (comprised of the S&P 500, the Euro Stoxx 50, the Russell 2000, and the Barclay’s Aggregate Bond Index). Minnesota also has a true uncapped crediting strategy tracking the S&P 500 Low Volatility Index. Although this index usually does not grow quite as quickly as the traditional S&P 500 index, there is no spread or fee associated with choosing this option. For those needing access to early cash values, all of Minnesota Life’s IUL products offer an “Early Values Agreement.” For a nominal ongoing charge, this agreement removes any surrender charge from the policy-making more of your cash value available for withdrawal or policy loan in the early years when there is normally severely limited access. It’s worth noting that Minnesota Life is one of the few companies that keep the 1-year S&P caps of their older products exactly in line with whatever new product is being offered to the public. We like this “what’s good for the goose is good for the gander” approach rather than lowering caps on an old block business while offering higher caps to new clients. National Life Group (and Life of the Southwest) Conglomerate
Click to see the summary and highlights of National Life Group as a Top IUL Carrier of 2018When a client wants the strongest hybrid long-term care type protection from our list of best performing Indexed Universal Life policies, then we look to National Life Group and their subsidiary Life of the Southwest. With multiple different triggers and payout levels depending on the type and severity of the illness or injury, their Flex Life 2 or Peak Life IUL policies both offer a strong blend of performance and protection. Reminder: This type of hybrid life insurance / long-term care type coverage can be especially important when it comes to life insurance for businesses. Key Person insurance and Buy-Sell Agreements often lack any kind of insurance protecting against disability much less chronic illness and critical injury. The business is still at risk if an owner or key person becomes too sick or hurt to continue working. These types of hybrid life insurance policies that pay out a tax-free advance of the death benefit if the insured has a triggering illness or injury can help protect against this very real business risk. Even though this article is about the best performing Indexed Universal Life policies and not term insurance, it’s worth noting that National Life Group’s & LSW’s term products also have some of this built-in hybrid life insurance with long-term care type protection. The term will be somewhat more expensive than other term products on the market, but that makes sense because it is much more likely to pay a claim than a policy just covering premature death. When you buy one of National Life Group’s hybrid term life insurance products, you also have the contractual right to convert it to any of their permanent products at any time during the term. This can be a great option when cash flow is an issue, you want the protection, and you can’t immediately afford as big of an Indexed Universal Life policy as you would eventually like to own. Despite the strong hybrid insurance protection offered by National Life Group’s IUL policies, they still have some very solid and unique crediting strategies. National Life Group is the only company offering Indexed Universal Life that has a pure MSCI Emerging Market index strategy (with an 11.25% cap as of February 2018). They also have an uncapped option where you can earn 60% of the S&P 500’s annual performance with no spread or fee. This option may be very favorable in years where we’re in a really strong economy, or perhaps you expect a steep and swift rebound after a correction or recession. National Life Group also comes in tied for first with Minnesota in terms of the lowest locked policy loan rate where you can still fully participate dollar for dollar in a 1-year S&P 500 index crediting strategy currently capped at 12% (as of February 2018). Although the cap can change, at least clients will have the certainty of knowing their loan rate is locked in at 5% when borrowing for outside investment opportunities or simply using their IUL for tax-free retirement income. Also, following in the footsteps of Minnesota Life, National Life Group is one of the companies offering Indexed Universal Life where you can choose to break up the death benefit into a series of installments. By doing so at the onset of the policy you can substantially offset the ongoing cost of insurance, especially for older or lower-rated insureds. This can make a huge impact when using IUL for retirement and tax-free income. They also have the very flexible Balance Sheet Benefit rider, which provides more access to early cash value. Although this rider comes with a nominal ongoing cost that will drag on performance, access early liquidity may be absolutely necessary for you, and this rider essentially forgoes the normal surrender charges making much more of the cash value accessible during the early years of the IUL policy. For those with longevity in their family history, National Life Group offers a very unique Income Benefit Rider. By electing this option, you can guarantee yourself a stream of income payments for life. Even if your cash value erodes to zero as you use your IUL policy for retirement income, National Life Group with continue making those payments as long as you live. This can be especially helpful for those with longevity in their family history wanting to set up contractual lifetime tax-free income payments you can’t outlive when using IUL for retirement. Pacific Life
Click to see the summary and highlights of Pacific Life as a Top IUL Company of 2018If your main goal is to maximize long-term retirement income, then you should definitely consider Pacific Life. By front-loading their charges into the earlier years of their policies, Pacific Life historically has some of the leanest later-year costs in the industry. Also, their fixed-loan is contractually locked at 2.25% for the life of the policy. This type of loan doesn’t allow you to participate in any indexed crediting strategies, but you’re guaranteed to earn 2% during the first 5 policy years, and then the guaranteed crediting rate goes up to 2.25% after that. This is referred to as a “wash loan” since you’re earning interest exactly on par with the amount of the loan, which happens to be the lowest in the industry. When not wanting to gamble with the performance of an index when using IUL for retirement, Pacific Life’s fixed loan and lean back-end costs of insurance often translates to very strong income against comparable products. Following in the footsteps of Minnesota Life, Pacific Life gives you the option at the onset of the policy to have a percentage of the death benefit paid as a series of payments lasting from 10-30 years. This election helps to create even more tax-free income when using IUL for retirement because Pacific Life will offset the normal charges of the death benefit with an ongoing policy credit. In 2017 Pacific Life came out with a new product called the Pacific Discovery Xelerator, that has a feature totally unique to the industry. It’s not for everybody because it comes with higher policy charges, but if you believe that the S&P 500 will continue to have more up-years than down-years, than the new Pacific Discovery Xelerator product may be the best way to capitalize on that volatility with some guard rails. What Pacific Life did is create something called their “Performance Factor” that multiplies the amount of crediting you can earn from the S&P 500’s movement without a cap. You still have a 0% floor so there won’t be any market losses to the downside like all Indexed Universal Life policies. However, be very clear that there is a substantial extra charge for this additional dynamic exposure to magnifying the positive index movement. In any year you can avoid these charges by allocating to the fixed-interest account. Pacific Life is also the only one of our best-performing IULs where you can attach a No-Lapse-Guarantee rider for a nominal additional charge. In fact, as a safeguard against the higher charges possibly eroding the IUL’s cash value if global stock indexes incurred an unprecedented string of extended negative years, we strongly recommend having the No-Lapse-Guarantee rider keeping the policy in force as an extra measure of safety. So to clarify, any amount of index crediting you earn from whichever of Pacific Life’s index strategies you choose could be multiplied well beyond the cap by their Performance Factor. Depending on a number of variables of the dynamic calculation, you can get 1.5x, 2x, 3x, even 4x the amount of crediting that you would normally be entitled to in any given year. Click here to learn all about the PDX product and its performance factor. With a unique array of crediting strategies, Pacific Life’s Pacific Discovery Xelerator IUL gives you many choices to grow your cash value including a blended international index. This strategy combines the diversified performance of the Euro Stoxx 50, the MSCI Emerging Markets Index, and the Hang Sang Index currently with an 11% cap (as of February 2018). Pacific Life has the lowest 1-year S&P 500 cap of all the best performing IULs at 10% (as of April 2018). To make up for that, they offer a 2-Year S&P 500 index strategy currently with a 30% cap, and a 5-year S&P 500 index with no-cap and even a 110% participation rate, meaning they will multiply the total 5-year index growth by 1.1x. Since you can mix and match different index crediting strategies, we strongly recommend that you blend these longer-term strategies with some of their 1-year crediting strategies and possibly even the fixed account. This way you avoid situations a total goose-egg in your IUL during flat or losing periods of the S&P 500. Pacific Life is the biggest company on our list that consistently has had the top-selling IUL of all companies that offer IUL according to LIMRA’s measured by total premium. Pacific Life also boasts lowering costs for consumers 17 times over the last 32 years. Similar to Minnesota Life, Pacific Life is a stand for always providing the exact same options for existing policyholders that are being offered with their new Indexed Universal Life policies in terms of caps and floors. Penn Mutual
Click to see the summary and highlights of Penn Mutual as a Top IUL Carrier of 2018As the second oldest insurance company in America (and the oldest on this list of IUL reviews), Penn Mutual’s commitment to guarantees is top-notch. Their Accumulation Builder Select IUL gives a great blend of rock-solid guarantees with the ability for exceptional cash value growth. Let’s talk guarantees. Of all the top indexed universal life companies, Penn Mutual is the only one that offers an annualized 1% guaranteed floor credited monthly on your entire cash value balance. Also, Penn Mutual’s IUL has a guaranteed Indexed Crediting Enhancement (called ICE) that pays you an additional 10% of whatever crediting you earn in any of Penn Mutual’s Indexed Crediting strategies. So really, Penn’s guaranteed 1% floor actually grows your cash value by 1.1% where almost all other companies offering Indexed Universal Life have a guaranteed floor of 0%. Note: You may often hear of companies offering Indexed Universal Life insurance boasting a 2% or 3% guaranteed minimum crediting. However, when you drill deeper into their IUL’s contract language, you’ll find that is only a lookback rate they give you if you’re about to lapse the policy. Other companies may true up your policy with a retroactively annualized 2% lookback credit every 5 years if the indexed strategies you chose did not return at least that annualized 2% every 5-years. In all reality though, it’s difficult to find 5-year periods in the S&P 500 that don’t average at least 2% when there’s a 0% in losing years. Penn Mutual, on the other hand, credits their annualized 1% floor every month to your entire cash value balance. They pay any additional crediting earned at the end of the 12-month period. Penn Mutual offers a locked participating loan rate of 6%, but you have the comfort of knowing that you will earn at least 1.1% inside your Indexed Universal Life policy to offset any accrued loan interest. Their 11% S&P cap really equals 12.1% since the ICE (Penn’s guaranteed 10% Indexed Crediting Enhancement) is credited over and above the cap. It’s really like you have a 110% participation rate on anything in between as well. So if the S&P does 8% in a given year, your IUL’s cash value would get credited 8.8%. Penn Mutual’s Accumulation Builder Select has a very unique 5-year crediting strategy where you can earn up to a total of 77% (with ICE) over 5-years. However, unlike other multi-year strategies, Penn gives you the ability to lock a portion of your index gains each year, without the risk of them being erased if the S&P 500 tanks in the 5th year. So, each year in this 5-year index option you are guaranteed to earn somewhere between 1.1%-6.05% (with ICE) tracking the S&P 500. At the end of the 5 years, they look at how much the S&P 500 gained over those 5-years minus what they already paid you along the way. Penn Mutual will then credit your IUL policy with the difference up to a total of 77% over the cumulative 5-year period. These kinds of unique crediting options inside their Indexed Universal Life policy giving you the ability to earn strong growth while still protecting you with reasonable guarantees, makes Penn Mutual one of the top IUL carriers of 2018. Honorable Mention #1: North American / Midland National Life Insurance Companies under Sammons
Click to see the summary and highlights of North American / Midland National Life Insurance as a Top IUL Carrier of 2018The Indexed Universal Life product offerings under the Sammons Financial Group parent company are worth an honorable mention among the top IUL carriers of 2018. Now we must disclose that they are the only non-mutual insurance group on this list of our favorite companies that offer indexed universal life insurance. They are however an employee-owned conglomerate with all companies under their umbrella part of an ESOP (employee stock ownership plan). So, even though the North American and Midland brands are not mutual companies, they are not publicly-traded stock companies beholden to the short-term whims of Wall Street analysts and outside investors. They have proven thus far that their 100% employee-owned structure would lend itself to conservative long-term decision making. The reasons why you might consider an IUL from North American or Midland National is because they offer that favorable blend of features we consider essential to be one of the top Indexed Universal Life products:
Although they may not have the best in any of these categories above, they offer this favorable combination of features that we feel necessary when considering using an Indexed Universal Life insurance for retirement and wealth-building. Honorable Mention #2: Symetra Life
Click to see the summary and highlights of Symetra Life as a Top IUL Company of 2018Symetra Life’s hot new Accumulator IUL product definitely has most of the attributes we require and competes with the best performing IULs reviewed above. However, we’re including Symetra Life as an honorable mention amongst the top IUL carriers of 2018 for these reasons below:
Is the fact that Symetra Life is a Japanese mutual company rather than an American mutual company a bad thing? Not necessarily. After all, many of the major American mutual companies are trying to diversify their business by tapping into different Asian countries. Sumitomo Life has already been playing in various diverse Asian markets for years which insulates and diversifies their cash flow. Also, don’t Americans celebrate the efficient engineering of Japanese cars and electronics? Wouldn’t the same kind of economic efficiency bode well with an Indexed Universal Life policy for retirement? I believe so, and Symetra Life’s Accumulator IUL appears to have a lean and efficient cost structure in the vain of Japanese efficient technology. The fact that Symetra Life is late to the IUL party may not be a bad thing either. They have a history of doing intense research and competitive analysis into whichever sector of the American life insurance market that they want to penetrate. They claim this is to ensure a very competitive yet sustainable product. This is exactly what Symetra did before creating a very competitive Term Insurance and Guaranteed UL portfolio. They seemed to be following the same successful playbook before launching their Accumulator IUL product in October 2017. Symetra Life’s Accumulator IUL product has a lot going for it in addition to a very efficient cost structure. They have a competitive free chronic illness rider and a more comprehensive hybrid long-term care rider that you can pay for. The Accumulator IUL offers a participating loan locked at 6% for the life of the contract. You can elect any of three indexed crediting strategies whether borrowing or not:
So although Symetra does not quite have the tenure that our other top IUL carriers of 2018 have, their Accumulator IUL has all the key design features we like to see. Because of their efficient cost structure, locked loan rate, and competitive indexed crediting strategies, it definitely deserves an honorable mention when looking at the best performing IULs of 2018. Here are the different criteria we consider when reviewing these companies that offer indexed universal life.
These criteria below are factors we consider essential to be considered a top IUL carrier. That said, we may sometimes consider a company which lacks some of these criteria if a client has extenuating health circumstances. At times certain companies may be more forgiving with a particular underwriting issue than our favorite companies that offer indexed universal life insurance. Unless an extenuating circumstance like this exists, we will stick with the top IUL companies that adhere to our standards below:
Click here to understand why this is expected of top IUL companies:Companies that are traded on public exchanges and owned by outside investors often make financial decisions geared towards quarterly earnings reports to appease Wall Street and short-term investors. Privately-owned companies and mutual companies, in particular, tend to take a longer-term approach since they don’t have these potential conflicts of interest putting pressure on their financial decision-making. We’ve written a comprehensive article on the mutual company advantage when it comes to choosing the best life insurance company, which you should check out now.
Click here to learn why this is required of a top IUL carrier:Obviously, everyone wants to have a financially strong insurance company backing these promises that should last a lifetime. Most people searching for the top IUL carriers of 2018 don’t realize that almost every company offering indexed universal life insurance is “A-rated.” What does that even mean? Did you know that an “A-rating” actually means something different for each independent rating agency? We often refer to a rating metric called the Comdex Score, which takes into account all four of the major rating agencies. The Comdex score is a percentile ranking between 1-100 for every type of insurance company in existence, not just companies that offer IUL. It’s kind of like grading on a curve relative to your peers. We also closely consider the size and especially the surplus of the company, since that can provide a cushion during hard times.
Click here to understand why this is expected of top IUL companies:Since the internal policy charges and cost of insurance will erode some of an IUL’s cash value growth, we want to keep these to a minimum. Unfortunately, insurance companies aren’t earning as much yield from incoming premiums as they used to. To make up for this, some IUL carriers have increased their internal charges and cost of insurance inside their policies. If anything, these costs should go down since people are living longer these days. We often find that the culprits are stock insurance companies responding to the short-term pressures of Wall Street (see the description of #2 above for reference). The top IUL carriers have never done this, and doing so would certainly remove them from this list.
Click here to learn why this is required of a top IUL carrier:As interest rates have declined, all the top IUL carriers have had to lower their S&P 500 caps. It is nothing malicious or “bait and switchy.” In fact, it makes perfectly logical sense as to why they must make these adjustments. Insurance companies invest mostly in bonds, and the new bonds bought with incoming premiums are paying less and less of a yield. Before long, all insurance companies that offer indexed universal life have less of an options budget to buy as high of a cap on the S&P 500 as they could when interest rates were higher. So, lowering caps has been a necessary evil for all the top IUL carriers in 2018. That on its own is not a deal-killer for us. What is a deal-killer for us, is when a company offering IUL lowers their caps well below what we are seeing with the rest of the industry.
Click here to understand why this is expected of top IUL companies:Most of the time, how people rate the best performing IUL policy is to just consider the 1-year S&P 500 cap. Although this can be important, many of the top IUL carriers of 2018 offer unique indexed growth strategies that still give you the downside protection of a 0% in down-market years, but perhaps a better shot at upside growth. Some companies that offer indexed universal life offer:
It’s important that you take this into an account when considering which will be the best performing IUL for you.
Click here to learn why this is required of a top IUL carrier:Even though this is 5th on the list, I can’t emphasize enough how important this factor is. Also, I know that many of you hear the word “loan” and think that you may never use that. However, policy loans are different than consumer loans and can be an incredibly efficient way to access your IUL policy’s equity tax-free both before and during retirement. Imagine having a contractually locked line of credit at competitive rates that you can access at any time for any reason with the most flexible terms available. Basically, as long as your cash value over and above the loan can support the IUL policy, no principal or interest payments are due ever. It is the most flexible terms you will ever get ever (except maybe from your mom). And while you’re borrowing any amount, the full amount of your Indexed Universal Life policy’s cash value continues to earn indexed crediting as if you had no loan outstanding whatsoever. Needless to say, having a loan rate that is contractually locked or capped at a reasonable rate once you initiate the policy is a huge advantage offered by the top IUL carriers of 2018. Most of the best performing IUL policies on our list offer loan rates locked for your entire life in the 5% to 6% range. That may not seem especially low at the moment, but inflation will most certainly rear its ugly head at some point. If so, then a locked-loan from an IUL policy used for retirement and tax-free income can provide a huge leg up.
Click here to understand why this is expected of top IUL companies:Nowadays, every company that offers Indexed Universal Life has provisions that allow for some sort of early access to the portion of the death benefit if the insured becomes terminally ill, chronically ill, or possibly even critically injured. However, some of these provisions are better than others. One thing to consider is a saying I repeat often, “There are no deals in insurance.” That means that the companies offering the best hybrid life insurance / long-term care protection often are not the best performing IUL policies. That said, the top IUL carriers on our list offer some sort of protection to this degree, and a couple of these companies really excel in this area while also having strong performance. So, if having funds available for nursing care, home care, or home modification is important to you, you’ll want close attention to this feature inside an indexed universal life policy. Also, if you are a partner in a business, this may be an ideal component to solidify your buy-sell agreement or key-employee protection plan. Dying is less likely than getting seriously sick or hurt, but any of the above can impact the bottom line of your business.
Click here to learn why this is required of a top IUL carrier:Of all the different companies that offer indexed universal life, you’ll find all kinds of different riders being offered. Some are free riders and some cost an additional policy charge. These riders can be anything from covering the internal costs of insurance if you become disabled, to matching a portion of your death benefit if you choose to leave a small piece to charity upon your passing, to increasing the amount of early cash value you have access to. The riders that we normally focus on in our IUL reviews of the top IUL companies are ones that tend to boost the cash value performance or tax-free income projections when using IUL for retirement. However, everyone’s situation is unique so it is good to have agents knowledge and current about what is offered from the top IUL companies. Now What?To find the best performing Indexed Universal Life policy, consider having your own specific parameters run through an indexed universal life calculator from each of the top IUL carriers of 2018.
Happy Banking, John “Hutch” Hutchinson ChFC®, CLU®, EA, AEP®, CExPs® Share this blog: |
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