Most people who buy an IUL never hear the phrase “max funded” from their agent. That’s part of the problem. If your policy isn’t structured as a properly structured policy with a minimum death benefit, you’re probably paying for something you don’t need and leaving the thing you actually want, cash value, on the table.

Why Structure Determines Everything

Every dollar inside an IUL goes toward either death benefit cost or cash accumulation. The ratio depends entirely on how the policy is designed.

Insurance costs inside an IUL are calculated as a percentage of the death benefit. The bigger the death benefit, the bigger the cost drag on your cash value. A properly structured policy flips this. You select the minimum death benefit the IRS will allow for your funding level. That gets costs down to the legal floor, and every dollar you’re putting in works harder on the accumulation side.

The IRS standard that governs this is called the seven-pay test (also TAMRA limit). It sets the maximum amount you can fund a policy over seven years without it becoming a Modified Endowment Contract, or MEC. Hit that limit while keeping the death benefit as small as possible, and you’re max funded.

Most IULs aren’t structured this way, and a lot of that comes down to how agents get paid. Target premium structures pay agents significantly more than minimum death benefit structures. An agent writing a target premium policy on a client who came in for cash value accumulation can earn thousands of dollars more at signing. The client gets a policy loaded with death benefit they didn’t ask for. The cash value accumulation takes the hit.

That’s exactly the kind of thing critics point to when they say IULs are a scam. They’re not wrong about that specific setup. The agent wrote the wrong prescription.

Option a vs. Option B: the Other Critical Decision

Beyond funding level, there’s a second structural choice that matters: Option A, level death benefit, versus Option B, increasing death benefit.

Option B increases the death benefit as your cash value grows, so the insurer always owes your cash value plus a fixed face amount on top. The cost of insurance recalculates higher every year as the net amount at risk rises. Option A keeps the death benefit level. As your cash value grows, the net amount the company is actually on the hook for decreases. Lower net at risk means lower cost of insurance over time. Your dollars compound with less drag.

For a BankLite strategy, where accumulation and access to capital are the whole point, Option A with minimum death benefit is the right architecture.

Check the illustration on your existing policy. If the death benefit is set at target premium instead of minimum, and Option B is running in the background, you’re carrying unnecessary cost. It’s compressing your cash value every year it continues.

The gap between a properly structured policy and a poorly structured one historically shows up as hundreds of thousands of dollars in cash value at year 20 or 30. Those dead dollars don’t come back.

How to Spot a Properly Structured Policy

1. Pull your policy illustration and check the input page for the design the agent actually chose.
2. Look for minimum death benefit paired with Option A, not target premium and Option B.
3. Ask your agent to explain why they chose this structure; the answer should mention the seven-pay test and cost of insurance.
4. Run a side-by-side comparison with a max funded minimum-death-benefit version to see the cash value difference over time.

A properly structured policy is the only structure that makes the math work the way it’s supposed to. If you want to see how this works with your numbers, reach out and we’ll run it side by side. The difference usually speaks for itself.