Key Takeaways
- North American’s fixed loan provision can show $26,000 more annual income than the variable loan—but only 0.5% of the 2% bonus is actually guaranteed.
- The carrier can strip away the non-guaranteed bonus at any time, potentially reducing your illustrated income by 35% or more without changing index performance.
- Most agents either don’t understand this distinction or deliberately use fixed loans to show inflated numbers and win the sale.
- The right way to evaluate an IUL illustration is to focus on guaranteed provisions, not hypothetical bonuses that may disappear.
- Always ask your agent to show you both fixed and variable loan scenarios—and demand clarity on what’s contractually guaranteed versus illustrated.
If you’re shopping for an Indexed Universal Life (IUL) policy, here’s what most people get wrong: they compare illustrations based on the income numbers alone, without digging into *how* those numbers are generated.
The North American Builder Plus IUL4 is one of the most popular products on the market right now. And there’s a specific tactic agents are using in illustrations that could leave you with a nasty surprise decades from now.
The $26,000 Gap Nobody Talks About
Here’s the setup: a $50,000 premium for seven years, designed to maximize cash value with minimum death benefit. The illustration rate is 6%—reasonable, conservative, doable. Income starts at age 65.
Using the **fixed loan provision**, the illustration shows **$74,000** in annual tax-free income for life.
Same policy. Same premium. Same index. The only change? Switch to the **variable loan provision**. Now the income drops to **$48,000**.
That’s a $26,000 difference. Every year. For potentially 30+ years.
Where the Numbers Come From
The fixed loan includes a “bonus” provision. On the illustration, it shows as a 2% bonus on loaned dollars. Sounds great in theory.
Here’s the problem: only 0.5% of that bonus is contractually guaranteed. The other 1.5%? North American can take it away whenever they want. They’re not locked into it. There’s no obligation.
Yet agents across the industry are running illustrations showing that full 2% bonus for 60 years straight. They’re presenting hypothetical income as if it’s etched in stone.
Why This Matters
Let’s be clear about what contractually guaranteed means: it’s what the carrier *must* honor. Everything else is a maybe.
If North American reduces that bonus—and they absolutely can—you’re not getting $74,000. You’re getting something much closer to $48,000. Maybe less. And this happens without the S&P 500 performing any differently. No market crash required.
The agents using this design either don’t understand the distinction, or they do understand it and want to show you the biggest possible numbers to close the sale.
Either way, you’re the one left holding the bag when reality doesn’t match the illustration.
How to Protect Yourself
When reviewing any IUL illustration, demand to see both scenarios side-by-side: fixed loan and variable loan. Ask specifically: “What portion of this income is guaranteed by contract, and what portion is non-guaranteed bonus?”
If your agent can’t answer clearly—or gets defensive— that’s a red flag.
The right way to evaluate these products is to stress-test against guaranteed provisions first, then layer in non-guaranteed elements with eyes wide open. Anyone showing you rosy numbers without explaining the contractual limitations isn’t doing you any favors.
Learn More from Matt Decker, CFP
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