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5 Questions to Ask Your Agent

Before you sign the dotted line on a permanent life insurance policy, put your agent to the test with these five transparency-focused questions.

1. "Can I see an illustration at a 4% or 5% interest rate?"

Most IUL illustrations are shown at the maximum legal rate (around 6-7%). However, the market rarely moves in a straight line. By seeing a 4% "stress test," you can see if the policy remains healthy during a "lost decade" or if you would be required to pay significantly higher premiums to keep it from lapsing.

2. "Is this a 'Participating' or 'Non-Participating' policy?"

If you are buying Whole Life, you want a Participating policy from a mutual company. This ensures you are eligible to receive dividends, which are the primary driver of growth in a Whole Life contract.

3. "What happens to my Death Benefit if the market returns 0% for three years while I have a loan?"

This is the ultimate test for an IUL. You want to see how the rising Cost of Insurance and the loan interest affect your "Net Amount at Risk." If the death benefit starts to drop rapidly in this scenario, you need to know the plan for paying back the loan.

4. "What are the specific 'Expense Charges' on my premiums?"

Don't just look at the cash value; look at what is taken out before the money even starts working for you. Ask for the breakdown of the Premium Expense Charge (the "off-the-top" fee) and the Monthly Admin Fees.

5. "If I stop paying premiums in Year 10, exactly what happens?"

In a Whole Life policy, this might trigger a "Reduced Paid-Up" status. In an IUL, it might mean the policy drains the cash value to pay for itself until it eventually lapses. Knowing the "exit strategy" for your premiums is vital for long-term planning.