Yes, IUL fees are real. But whether they eat your returns depends entirely on how the policy is structured. A properly structured IUL runs roughly $10 to $20 in costs per $100 deposited. A badly structured one sends far more of every dollar to insurance charges instead of cash value, and most IULs out there are badly structured. That’s the math nobody shows you, and it’s also why the question “are IULs a scam?” keeps getting asked.

The answer to whether fees ruin IUL isn’t the product. It’s the design.

Why Do so Many People Say IUL Fees Destroyed Their Returns?

Because most of them owned a badly structured policy. The vast majority of IULs are not built correctly, and a bloated fee load is the most visible symptom of that bad structure.

Here’s how it happens. Agents earn higher commissions when they use what’s called “target premium,” which loads the policy with more death benefit than you need. A higher death benefit means higher cost of insurance, and the Internal Revenue Code section 7702 definition of life insurance forces a corridor between cash value and death benefit, so that inflated death benefit directly inflates what the carrier charges. More of your premium goes to cover the insurance side of the product and less compounds in cash value. The agent gets paid. You get a policy that looks fine on paper until 10 years in, when you realize the cash value is way behind where it should be. This is why we say the agent is the problem, not the product. The pharmacist isn’t at fault when the doctor writes the wrong prescription.

What Do IUL Fees Cost in a Properly Built Policy?

In a max-funded, minimum death benefit policy, total costs run roughly $10 to $20 per $100 deposited, and that drag shrinks every year the policy does its job.

When a policy is built correctly, the design flips. You buy the smallest amount of death benefit the IRS will allow, which keeps the cost of insurance low, and you fund the policy as aggressively as the seven-pay limit in Internal Revenue Code section 7702A permits, which builds cash value fast. In that setup, costs run roughly $10 to $20 per $100 deposited. That’s a 10% to 20% drag in year one on a cold entry, but that number is misleading because it’s front-loaded. The cost of insurance is based on the gap between your cash value and your death benefit. As your cash value grows, that gap shrinks, so you’re insuring less and less over time.

That is the opposite of what most people assume, and it is why a front-loaded cost number looks worse than it turns out to be. You can read more about how the banking mechanic works inside a properly structured policy at /infinite-banking/.

Why is the Agent’s Incentive the Real Fee Problem?

Because agents earn more when they load a policy with death benefit you don’t need, and that extra death benefit is exactly what drives the fees up. The cost problem is a sales-incentive problem, not a product problem.

Agents structure IULs the opposite of what’s best for the client to earn significantly more in commission. The gap between a properly structured policy and a target-premium policy can exceed $400,000 in cash value over 30 years, with annual income of roughly $100,000 against $61,000 in the properly structured version. That’s not a fee problem. That’s a prescription problem. The fix is knowing what to look for before you sign anything. A properly structured BankLite policy is built with minimum death benefit and maximum funding from day one, because the purpose is cash value, not death benefit. If an advisor isn’t building it that way, the math will never work in your favor.

Checklist: Red flags in how a policy is quoted

1. Death benefit is much larger than your income replacement need
2. The illustrated premium is at “target” not “maximum”
3. Cash value in year one is under 60% to 70% of premiums paid
4. The agent can’t explain why minimum death benefit is or isn’t the right call
5. No side-by-side illustration of minimum vs. target structure

If you see any of those, walk away.

If you want to see this math run on your actual numbers, book a strategy call. We’ll build both sides of the illustration and show you exactly what your fees look like in a properly structured BankLite policy versus what most agents are quoting.