IUL Rate of Return Probably Chart (quite eye-opening)!

To download the IUL ROR probability chart, click on the following link: https://advisorshare.com/iul-probability-of-return

What’s the realistic rate of return that can be expected from the policy?

This is the #1 question advisors and their clients have when buying an Indexed Universal Life product.

If an IUL has a 12%, or an 11%, 10%, 9%, or 8% S&P 500 annual point-to-point cap, what is the probability that the product would have generated a return of 5%, 6%, 7%, 8%, etc. over the last 25 years?

Here’s a glimpse at the numbers:

  • 9.0% cap had a 12% chance of generating a 6% rate of return over the last 25 years.
  • 10% cap had a 32% chance of generating a 6% rate of return over the last 25 years.
  • 11% cap had a 60% chance of generating a 6% rate of return over the last 25 years.
  • 12% cap had a 76% chance of generating a 6% rate of return over the last 25 years.

The following is what the chart looks like without the actual numbers.


Why is this chart so important? Because it will help advisors determine if the rate they are illustrating for clients is “conservative.” Most advisors like to illustrate at the insurance company “default” rate. We at www.advisorshare.com recommend against “default” rate illustrations and this probability of return chart illustrates why.

IUL with the 12.5% S&P 500 Cap

S&P 500 caps at most companies are between 8%-11%.

  • 10.75%  Allianz  
  • 8.8%      North American
  • 9.0%      Ameritas
  • 8.5%      LSW/National Life
  • 8.0%      Pac Life

There is one company that has historically been very strong with their caps, and they are currently at 12.5% (FYI, their lowest cap rate in the last 7+ years). I expect that cap rate to increase now that bond yields are on the rise.

To learn about the IUL with a 12.5% S&P 500 cap, click on the following link: https://advisorshare.com/best-7702-iul-policy

Online IUL Probability of Return Calculator

After creating the above chart, I concluded that advisors need an online calculator so that they can run these numbers and even be able to choose any time frame they want.

So, within the next 30-days, we’ll be rolling one out for advisors to use. If you want access to that calculator, sign up for the above-referenced chart and you’ll be added to the list.

Volatility Control Indexes (VCIs)

Many advisors are selling IULs with VCI indexes. That’s fine and I have my favorites, but we still recommend that clients split money between a VCI and the S&P 500. Why? Because the S&P 500 has a long track record that is fairly predictable over time. Most VCIs are less than 5 years old.

Because VCIs seem to be the wave of the future for index products, when we roll out the online IUL calculator, we will build in multiple VCIs that can be tested. Those tests will need to be taken with a grain of salt, but I think it’s useful to see that data.

When you download the S&P 500 chart referenced above, you will also get the numbers on my favorite IUL’s VCI. Here’s a hint about the numbers: there is a 66.7% probability that it will return 6.5% going back 25 years.

For information on the IUL that offers the above referenced VCI, click on the following link: https://advisorshare.com/best-7702-iul-policy

Summary—if you are currently selling or thinking of selling an IUL, the Probability of Return Chart is a must download.

When you sign up to download the chart shown above, you will also be able to review a chart with the straight line CAGR numbers for the same caps. The chart will indicate the chances a product achieved a certain rate of return if  its was funded starting 25 years ago (1997). For example, if the product had a 12.5% cap, there was a 100% chance the product returned at least 7% as its CAGR.