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At Fleming Financial Services, Inc., our role is to assist our clients in defining and realizing their financial objectives and goals. We work with our clients to implement personalized plans designed for their unique situations. Our areas of concentration are: Retirement planning, Estate and Wealth Transfer strategies, and Business Continuation planning. We emphasize the importance of conducting our business with integrity and professionalism. As a member of PartnersFinancial, an independent national financial services company, we are able to provide access to sophisticated resources for the benefit of our clients. Some of the professionals with our firm are currently registered to conduct business through NFP Securities, Inc. With those additional resources in place, we help facilitate the complex corporate and personal financial decisions our clients must make.
INDEXED UNIVERSAL LIFE: Mechanics and Capabilities - Part 5
Celeste Moya, AVP, Product Management, NFP Life Finance 2The same issue would arise if the insurance company’s general account yields decreased without an equivalent decrease in the options’ prices to hedge the participation limits the company has agreed to within the IUL policy.  If, on the other hand, general account yields increased or options prices decreased, an insurance company may be able to increase the cap or participation rates. Therefore, it is important to understand that it is not solely the movement of the index (or indexes) that affects overall performance of an IUL policy; it is how well the insurance company manages its own investments. Key Elements of an IUL There are several key aspects of IUL that agents and clients must be aware of when considering an IUL product as part of a life insurance portfolio. Returns Do Not Include Dividends Since the IUL premiums are not invested directly into an index, the insurance company never receives the benefit of dividends on the index. For that reason, the dividend return cannot be passed on to the client and are generally not included in the calculation of an IUL return. Additionally, the cost of options purchased on an index that reflects dividends would be more expensive, forcing carriers to lower cap or participation rates. Discretionary Participation Limits Most IUL policies allow the insurance carrier to change the participation limits during the life of the policy down to the contractually guaranteed minimum cap and participation rates. These changes can be made by the insurance company at the beginning of a new segment. Such guaranteed rates tend to be low, particularly the one-year guaranteed cap rate that currently ranges from 2–4 percent. The participation rate is not always as affected if the insurance company makes this change, because with most IUL policies and index strategies the participation rate is guaranteed at 100 percent. Additionally, carriers are not obligated to maintain identical participation limits between new and in-force IUL policies. Copyright © 2013 NFP. All rights reserved.    
Thomas Joseph
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Categories: Fleming Financial Services, Fleming Financial, General Information, Life Insurance
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