Get the policy form number before you price anything, because Madison National’s business is group coverage and a retail indexed universal life contract is unlikely to be what you hold. Madison National Life Insurance Company, Inc. is headquartered in Madison, Wisconsin and writes employer-sponsored group life, short-term and long-term group disability, and specialty health, predominantly for educators and public sector employers – K-12 school districts accounted for roughly 80 percent of its premium in 2020. Accumulation-oriented individual life with index accounts is a different business entirely.
Two likelier explanations exist. The first is an individual policy issued by Horace Mann Life Insurance Company, based in Springfield, Illinois, which has written individual life and annuities for educators for decades and which completed its acquisition of Madison National on January 3, 2022 – so both names can appear in the same household’s file. The second is that the policy came from an unrelated carrier and the Madison National name attached to a separate group benefit. Either way, if the contract does turn out to be index-linked, everything below applies, because IUL mechanics behave the same regardless of whose name is on the cover.
In This Article
- Establish the contract before you evaluate it
- The three levers that decide what you are actually credited
- Cost of insurance drag is what actually kills these policies
- What AG 49, 49-A and 49-B changed, and what they did not
- The illustration request, written out
- MEC status, and what a buyer actually does with the file
- Frequently Asked Questions
Establish the contract before you evaluate it
Call the servicing number on your statement and ask for two specific things: the policy form number and the product name as filed. Form numbers are unambiguous. Statements use marketing language loosely, agents describe products from memory, and “index” appears in enough places on enough documents to mislead. While you have someone on the line, ask whether the contract has an account value with a monthly cost of insurance deduction – if it does not, it is not universal life of any kind.
Ask also which company holds the obligation. Horace Mann Educators Corporation acquired Madison National Life from Independence Holding Company in a $172.5 million transaction that closed on January 3, 2022, and it entered a long-term distribution agreement with National Insurance Services, Madison National’s distribution partner for close to forty years. In the years since, correspondence has carried both names. The issuing company on the contract itself is the one that matters, and Madison National is domiciled in Wisconsin, supervised by the Wisconsin Office of the Commissioner of Insurance, while Horace Mann Life is an Illinois company.
If it emerges that what you hold is a group certificate rather than an individual policy, stop treating this as a valuation question. Certificates are not owned by the insured and cannot be transferred; the live issue is the conversion or portability window, and it is short.
The three levers that decide what you are actually credited
An indexed universal life policy does not own the index and receives no dividends from it. The carrier holds general account assets, spends a portion of the earnings on options, and credits your account value by formula. The formula has three moving parts and each one takes a bite.
The cap is the ceiling on the credited rate for a segment. A cap of 8 percent credits 8 percent whether the index rose 9 percent or 29 percent – in a strong year the cap does most of the work. The participation rate is the share of the index movement you receive before the cap applies; 70 percent participation on a 10 percent index move credits 7 percent. The floor, typically zero, means a year in which the index falls 25 percent credits nothing rather than reducing your account value by the index loss. That protection is real and it is the product’s main argument for itself.
Two things get glossed over at the point of sale. Index credits are almost always calculated excluding dividends, and dividends have historically been a meaningful share of total index return. And caps and participation rates are declared by the carrier, not guaranteed; they can be lowered over the life of the contract down to a guaranteed minimum that is usually far below the rate quoted at issue. A policy sold at a 12 percent cap can be running at 8 percent fifteen years later entirely within its terms. See how indexed universal life works for the full mechanics.
Cost of insurance drag is what actually kills these policies
Crediting gets the attention; the deduction side determines survival. Every month the carrier subtracts a cost of insurance charge from account value, calculated on the net amount at risk – the death benefit less the account value – at the insured’s attained age. That charge is modest at 45 and unrecognizable at 82. It rises steeply through the seventies and then accelerates.
The two sides interact badly. When crediting is weak, account value falls; a lower account value means a larger net amount at risk; a larger net amount at risk means a bigger monthly deduction; the bigger deduction pushes account value lower still. That is the lapse spiral, and it does not announce itself. A contract that looked comfortable at year fifteen can be projecting lapse by year twenty-five with nothing having gone visibly wrong. Our page on what the cost of insurance charge is explains the calculation, and rising universal life costs covers what owners can and cannot do about it.
This is also why several zero-credit years clustered together do more damage than an average return suggests. The compounding that would have offset the rising deductions simply never happened, and there is no way to recover it later except by paying more premium.
| Illustration column | What it assumes | What it is good for |
|---|---|---|
| Current assumptions | Today’s declared crediting rate and current cost of insurance scale | A best case; useful only as a ceiling |
| Guaranteed assumptions | Guaranteed minimum crediting rate and guaranteed maximum cost of insurance | The worst case; the column buyers actually model |
| Midpoint, where offered | Halfway between current and guaranteed | Rough sensitivity check, nothing more |
| Premium solve to maturity | Premium required to carry the policy to age 100 | The real annual cost of keeping the contract |
| Original sales illustration | Assumptions in force at issue, often pre-AG 49 | A marketing document; not a forecast |
What AG 49, 49-A and 49-B changed, and what they did not
Regulators tightened indexed universal life illustration rules three times because sales illustrations were systematically optimistic. Actuarial Guideline 49 took effect in 2015 and capped the maximum illustrated crediting rate using a prescribed benchmark index account calculation. AG 49-A, effective for illustrations from late November 2020, addressed multiplier and bonus structures that were being used to illustrate around the original limit. AG 49-B, effective May 1, 2023, went further on proprietary and volatility-controlled index accounts and on fixed-account arbitrage.
Each round made new illustrations more conservative. None of it retroactively changed a contract sold in 2012, and none of it improved the policy in your drawer. What the sequence tells you is that the industry’s own regulators concluded, three separate times, that the projections being shown to buyers were too favorable. If you are holding a policy illustrated before 2015, treat the original illustration as a marketing document rather than a forecast.
That is not an argument that indexed universal life is a bad product. It is an argument that the only projection worth relying on is the one run today, on the contract’s own guaranteed terms, which is the subject of the next section.
The illustration request, written out
Ask the carrier in writing for three items, and name them precisely, because a generic request usually produces only the first one.
- An in-force illustration at current assumptions, showing the projected year the policy lapses if premiums continue at the current level.
- An in-force illustration at guaranteed assumptions – guaranteed maximum cost of insurance charges and the guaranteed minimum crediting rate. This is the run that tells the truth.
- A premium solve showing the annual premium required to carry the policy to maturity or to age 100 under both current and guaranteed assumptions.
The guaranteed-assumption run answers the only question that matters to anyone underwriting the contract, you included: if the carrier exercises every right the policy gives it, what year does this contract run out of money? A policy lapsing at attained age 78 on guaranteed assumptions is a fundamentally different asset from one carrying to 100, however similar the current-assumption pages look. Expect two to four weeks. Our script for requesting an in-force illustration gives the exact wording and what an in-force illustration is explains how to read the columns.
MEC status, and what a buyer actually does with the file
Accumulation-oriented policies are frequently funded close to the modified endowment contract line and some cross it. A contract becomes a MEC when premiums paid in the first seven years exceed the seven-pay limit under Internal Revenue Code section 7702A, and once it is a MEC it generally remains one through most material changes. Loans and withdrawals are then taxed last-in, first-out to the extent of gain, with an additional ten percent tax generally applying before age 59 and a half. That is the opposite of the tax treatment most owners assume they have.
MEC status does not prevent a transfer and does not by itself lower an offer. It changes the after-tax comparison among options: borrowing to fund premiums may generate current taxable income, surrendering produces ordinary income to the extent of gain over basis, and proceeds from a sale follow a different framework that turns on basis and on whether the insured is chronically or terminally ill. Those interactions belong with your own CPA – see what a MEC is for background.
As for the market: buyers do purchase indexed universal life, and they underwrite it the same way as any permanent policy – age and health drive a life expectancy estimate, and the projected premium stream drives the price. IUL files draw more scrutiny than guaranteed universal life because the future premium requirement is variable, which is exactly why the guaranteed-assumption illustration is the first document requested. Our page on how buyers price a policy walks through the model. If your contract is a survivorship design covering two lives, the pricing is different again – see survivorship coverage. Pine Lake Life Solutions offers a free educational 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 cover page and the illustrations once they arrive, or call (305) 209-7183. General framework: selling an indexed universal life policy.
Frequently Asked Questions
Does Madison National write indexed universal life?
Its business is employer-sponsored group life, group disability and specialty health, sold predominantly to educators and public sector employers, with K-12 school districts accounting for roughly 80 percent of premium in 2020. Retail accumulation-oriented individual life is a different line. Ask for the policy form number and the filed product name before assuming what you hold is index-linked.
Who services my policy now, Madison National or Horace Mann?
Horace Mann Educators Corporation completed its acquisition of Madison National Life on January 3, 2022 in a $172.5 million transaction with Independence Holding Company, and both names have appeared on correspondence since. Read the issuing company on the contract itself, then ask the servicing desk to confirm in writing which entity holds the obligation and which administers claims.
The index went up but my policy barely moved. What happened?
Three things, usually all at once. The cap limited the credited rate; the participation rate reduced your share of the index movement before the cap applied; and index credits are typically calculated excluding dividends. On top of that, the monthly cost of insurance deduction comes out of account value regardless of what was credited, so a modest credit can be entirely consumed by charges.
Which illustration should I ask for?
All three: an in-force illustration at current assumptions, a second at guaranteed assumptions using guaranteed maximum cost of insurance and the guaranteed minimum crediting rate, and a premium solve showing what it costs annually to carry the policy to maturity. Name each one specifically in writing, because a generic request typically produces only the current-assumption run. Allow two to four weeks.
Does being a MEC hurt my chances of selling?
No. Modified endowment contract status does not prevent a transfer and does not by itself reduce an offer. What it changes is your after-tax comparison among options, because loans and withdrawals from a MEC are taxed last-in first-out to the extent of gain, with an additional ten percent tax generally applying before age 59 and a half. Take the specific numbers to your own CPA.
Does Pine Lake purchase indexed universal life policies?
No. Pine Lake Life Solutions does not purchase policies and is not licensed in every state. We provide a free educational policy review: send the policy cover page and the in-force illustrations once the carrier produces them, and we will read the guaranteed column, explain what it means for the contract’s survival, and lay out the realistic options. Call (305) 209-7183.
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Related Reading
- What Is Indexed Universal Life
- What Is Cost Of Insurance
- What Is An In Force Illustration
- Request In Force Illustration Script
- Can I Sell An Indexed Universal Life Policy
- Modified Endowment Contract Mec
- Universal Life Cost Increases
- How Buyers Price A Policy
- Sell My Madison National Survivorship Policy
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.