Possibly, but the decision is made by one document, and it is not the illustration you were shown when you bought the policy. An indexed universal life contract is a cash value account that gets charged monthly for the cost of insurance and gets credited annually based on an index formula. Whether it survives to pay a death benefit depends entirely on whether crediting keeps up with charges. The way to find out is an in-force illustration run at guaranteed assumptions, which the carrier must provide on request and which almost nobody asks for until something has already gone wrong.
Before going further, confirm what you actually own. COUNTRY Life Insurance Company, the life carrier in the COUNTRY Financial group, has publicly described a retail lineup built around term, whole life, and universal life. We cannot confirm a product currently marketed under an indexed universal life label, and we are not going to assert one exists. Many people who search this phrase are holding a current-assumption universal life policy and calling it indexed. The distinction changes everything about how the policy behaves, so start there.
In This Article
- Tell an indexed policy apart from a plain universal life policy
- Caps, participation rates, floors and spreads, in plain terms
- Why a policy that looked healthy in year one can be lapsing by year twenty
- AG 49, 49-A and 49-B: why the old illustration was legal and still misleading
- The in-force illustration at guaranteed rates is the whole ballgame
- When a settlement is the right answer, and the MEC wrinkle
- Frequently Asked Questions
Tell an indexed policy apart from a plain universal life policy
Turn to the policy schedule pages, the ones immediately behind the face page with the tables of guaranteed values and charges. An indexed universal life contract will name one or more index accounts, almost always tied to the S&P 500 price index, and will state three parameters for each: a cap or maximum crediting rate, a participation rate, and a floor, usually zero percent. It will also describe a segment structure, meaning money is swept into twelve-month buckets that each get measured on their own anniversary.
A current-assumption universal life policy shows none of that. It shows a declared interest rate set periodically by the insurer and a guaranteed minimum rate, commonly two or three percent on older contracts and lower on newer ones. There are no caps because there is no index.
The reason this matters is that the two products fail in different ways. Declared-rate universal life written in the 1980s and 1990s got into trouble because rates fell from double digits to near zero while the policy was funded on the assumption they would not. Indexed universal life gets into trouble because caps get lowered after issue, zero-return years stack up, and the cost of insurance keeps climbing regardless. If your schedule shows a declared rate rather than a cap, read our COUNTRY Financial universal life page instead, because the diagnosis is different.
While you have the policy out, note the exact issuing company. COUNTRY Financial is a group brand; COUNTRY Life Insurance Company is the Illinois-domiciled life carrier, supervised by the Illinois Department of Insurance, and a sibling entity has also written business in the group. The name on the contract determines whose service center runs your in-force illustration.
Caps, participation rates, floors and spreads, in plain terms
Index crediting is not investment in the index. You are not buying shares and you receive no dividends, which alone accounts for roughly two percentage points a year of the S&P 500’s historical total return. The insurer buys options with a hedge budget and passes through a formula.
The floor is the good part. A zero percent floor means a negative index year credits nothing rather than a loss. Note carefully that zero credited is not zero change in account value, because charges are still deducted that month. A flat year is a losing year inside the policy.
The cap is the annual maximum. If the cap is 9 percent and the index returns 22 percent, you are credited 9 percent. Caps are not guaranteed at the level shown when you bought. The contract sets a guaranteed minimum cap, often far lower than the current one, and the insurer may reset the current cap annually as its hedge budget changes. Caps across the industry compressed materially as interest rates moved over the last two decades, and policies sold on a 12 or 13 percent cap have been reset down repeatedly.
The participation rate multiplies the measured index change before the cap applies. A 100 percent participation rate is neutral; anything below it reduces credit. A spread or asset fee subtracts a fixed percentage from the index change and appears mostly on uncapped accounts.
Add these together and a decade of respectable index performance can produce a credited average in the mid single digits. That is not fraud; it is the product working exactly as designed. The problem is that the design was frequently presented as if it produced equity-like returns with bond-like risk.
Why a policy that looked healthy in year one can be lapsing by year twenty
The mechanism is cost of insurance drag, and it is arithmetic rather than misfortune. Each month the insurer deducts a cost of insurance charge calculated as the net amount at risk, meaning death benefit minus account value, multiplied by a per-thousand rate that rises steeply with the insured’s attained age. At 45 that rate is small. At 78 it is many multiples of what it was, and at 85 it can be brutal.
Now stack the two effects. In the early years the account value is small, so the net amount at risk is nearly the full death benefit, but the per-thousand rate is low. In the middle years, if crediting is decent, the account grows and the net amount at risk shrinks, which is the design working. But if crediting comes in below what was illustrated, say a real 5 percent average against an illustrated 7.5 percent, the account never grows enough to shrink the corridor. The insured ages, the rate per thousand climbs, the charge grows, the account grows more slowly, the net amount at risk stays large, and the charge grows again. That feedback loop is what produces the letter in year twenty-two demanding a premium several times the original planned payment to keep the contract alive.
Nothing about this is unique to one carrier. It is why cost of insurance is the single most important line item in any universal life chassis, and why owners of these policies should be reviewing them every three years rather than filing them away.
| Feature | Indexed universal life | Current-assumption universal life |
|---|---|---|
| How interest is credited | Formula tied to an index, measured in annual segments | Declared rate set periodically by the insurer |
| Downside protection | Floor, usually 0%, but charges still apply | Guaranteed minimum rate stated in contract |
| Upside limit | Cap, participation rate, and sometimes a spread | None stated; limited by the declared rate |
| What the insurer can change | Current cap and participation rate, down to contract minimums | Declared rate, down to the guaranteed minimum |
| Main failure mode | Cap compression plus rising cost of insurance | Falling declared rates plus rising cost of insurance |
| Document that settles the question | In-force illustration at guaranteed rates | In-force illustration at guaranteed rates |
AG 49, 49-A and 49-B: why the old illustration was legal and still misleading
Before 2015, illustration rules gave insurers wide latitude on the crediting rate they could show for index accounts, and competitive pressure pushed illustrated rates to levels that were arithmetically defensible only under favorable lookback assumptions. The National Association of Insurance Commissioners responded with Actuarial Guideline 49, which took effect for illustrations in 2015 and tied the maximum illustrated rate for index accounts to a long lookback of index performance using the policy’s own current parameters.
Carriers adapted. Products appeared with multipliers, bonuses, and proprietary volatility-controlled indices that produced high illustrated values without technically breaking the guideline. The NAIC adopted AG 49-A, effective for illustrations from December 2020, to close the multiplier and bonus arbitrage. Continuing pressure on proprietary index accounts led to AG 49-B, effective May 2023, which further constrained what may be shown.
The consumer takeaway is specific. If your policy was illustrated before 2015, the projection you were handed was produced under rules that no longer exist, and a compliant illustration of the same contract today would show a lower non-guaranteed column. That does not mean you were defrauded. It means the sales document is worthless as a planning tool now and should not be the basis for keeping, surrendering, or selling anything.
The in-force illustration at guaranteed rates is the whole ballgame
Request from the carrier an in-force illustration showing at minimum three scenarios: current charges with current caps and no premium change, guaranteed maximum charges with guaranteed minimum crediting, and the premium required to carry the policy to age 100 or to maturity under current assumptions. Ask in writing and ask for all three. Service centers routinely send only the flattering one.
The guaranteed column is not a prediction and it is not what will happen. It is the worst the insurer is contractually permitted to do to you, and it defines the boundary of your risk. If the policy lapses at age 79 on the guaranteed column while the insured is 71 and healthy, you are carrying real exposure. If it carries to 100 even on guarantees, you own something unusually solid and should probably keep it. Everything in between is a judgment call that needs numbers, not adjectives. Our explanation of what an in-force illustration is covers how to read the columns line by line.
One more request while you are on the phone: the current cap and participation rate for each index account, the guaranteed minimum cap, and the history of cap changes since issue. A policy whose cap has been cut three times in eight years is telling you something about how the insurer is managing that block.
When a settlement is the right answer, and the MEC wrinkle
An indexed universal life policy is generally a plausible settlement candidate when the insured is roughly 70 or older, the death benefit is meaningfully above $100,000, health has declined since issue, and the in-force illustration shows the contract needs premiums the owner does not want to pay. Buyers price these cases on the premium stream required to maintain the policy against a life expectancy estimate, so a contract with a heavy required premium is worth less than an identical face amount with a light one. Health that has genuinely worsened since underwriting is what creates the gap between cash surrender value and market value.
Selling is the wrong answer when the coverage is still needed for a specific obligation, when a paid-up or reduced death benefit option would solve the premium problem, or when the insured is healthy and young enough that the offer will be a small fraction of face. Compare honestly against keeping the policy before doing anything irreversible.
Watch the tax profile if the policy was funded aggressively. A contract that failed the seven-pay test under Internal Revenue Code section 7702A is a modified endowment contract, which changes how lifetime distributions and loans are treated and can add a penalty before age 59 and a half. It also affects the basis arithmetic in a sale. This is squarely a question for your own CPA, not for us and not for a settlement broker.
Pine Lake Life Solutions offers education and a free policy review. We do not purchase policies and are not licensed in every state, and nothing here is legal, tax, or investment advice. Send the policy cover page and the in-force illustration once you have it, and the review will tell you what the contract is actually doing.
Frequently Asked Questions
How do I know whether my COUNTRY Financial policy is indexed or not?
Look at the schedule pages for a named index account with a cap, a participation rate, and a floor. Those three parameters together mean indexed universal life. If instead you see a single declared interest rate and a guaranteed minimum rate with no cap, you hold a current-assumption universal life policy. The product name on the face page will usually confirm it once you know what to look for.
Can the insurer really lower my cap after I bought the policy?
Yes, within the contract’s own limits. Most indexed policies specify a current cap the insurer may reset, typically annually, and a much lower guaranteed minimum cap it may never go below. Caps across the industry were reduced repeatedly as hedge budgets shrank. Ask the carrier for the current cap, the guaranteed minimum, and the history of changes since your policy was issued.
Why did my policy credit zero percent in a year the market was up?
Index crediting usually measures point to point from your segment anniversary, not from January to December, and it excludes dividends. A calendar year that finished higher can still show a decline between your specific segment dates. Participation rates and spreads reduce the figure further. Ask for the segment start and end index values to see exactly how the credit was calculated.
What did AG 49-B change for policyholders?
AG 49-B, effective in 2023, further limited what carriers may show in indexed life illustrations, particularly for proprietary and volatility-controlled index accounts and for bonus structures. It follows AG 49 in 2015 and AG 49-A in 2020. For an existing policyholder the practical effect is that any illustration produced before those rules cannot be compared to one produced today.
Does having a modified endowment contract stop me from selling?
It does not block a sale, but it changes the tax analysis. A contract that failed the seven-pay test under Internal Revenue Code section 7702A is taxed differently on lifetime distributions and loans, and the basis calculation in a settlement follows different rules. Because the arithmetic depends on your policy history and your own tax situation, this belongs with your accountant before you sign anything.
Is it too late to fix a policy that is projected to lapse?
Often not, if you act while the insured is still insurable and the account value is not exhausted. Options include reducing the death benefit so charges fall, restructuring premium payments, moving funds to the fixed account, electing a paid-up option if one exists, or selling the contract. Every one of those depends on numbers from a current in-force illustration, so get that first.
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Related Reading
- Can I Sell An Indexed Universal Life Policy
- What Is Indexed Universal Life
- What Is An In Force Illustration
- What Is Cost Of Insurance
- What Is A Modified Endowment Contract
- Sell My Country Financial Universal Life Policy
- Life Settlement Vs Keeping The Policy
- Policy Lapsing What To Do
Pine Lake Life Solutions does not purchase life insurance policies and does not provide legal, tax, or investment advice. Information provided is for educational purposes only. Eligibility for any option, including life settlements, is not guaranteed and depends on individual circumstances, policy terms, underwriting, and market conditions. Consult independent legal, tax, or financial professionals before making decisions regarding a life insurance policy.