An IUL, or indexed universal life policy, comes with an illustration, which is the carrier's printed projection of how the policy could perform. Two columns matter most: the guaranteed column and the current column. Chapter 7 of Money in Motion walks through a real illustration, and the numbers show what each column is for.
The example is an 18-year-old woman in excellent health, paying $11,321 a year (about $943 a month) until age 65, with a death benefit that starts at $400,000. The current column assumes the index credits 6% every year, which I treat as a sober rate to plan around.
In year one she has paid $11,321, and the current column shows $7,738 of cash value, with the guaranteed column at $7,049. She's behind, and an IUL cashed out in year two is a bad trade. By year five she has paid $56,605 and the current column shows $57,746, so everything she's paid is back and working. At year ten, she has paid $113,210 and the current column shows $143,196. At year twenty she has paid $226,420 and the current column shows $429,083, nearly double, with a death benefit over $1 million. The death benefit climbs because the tax code requires a gap between it and the cash value.
Now look at the guaranteed column. At year twenty it reads $197,856 against $226,420 paid in, and it stays behind for a long time. The whole life example in the previous chapter broke even in its guaranteed column by year ten. This one doesn't. The guaranteed column on an IUL shows the floor. That floor means your credited rate never drops below zero in a bad year. It does not promise growth, and it doesn't say the carrier credits you anything in particular in a good one. The distance between the two columns is the risk you take on.
I think the guaranteed column is very unlikely to play out. For the major indexes to credit zero year after year, there would probably be far bigger problems in the economy, and there's always the fixed account to earn credits. But the current column is a projection and not a promise, and it leans on whatever crediting rate the illustration assumed. Pick an optimistic rate and the number in the bottom right corner gets enormous. Ask what rate the column uses, and ask the agent to rerun it at a more sober one.
A policy that only looks good at 7% and falls apart at 5% isn't a plan. The chapter covers where an IUL's real risk lives, in the cost of insurance, and you can read it in the paperback, Kindle edition, or free digital copy. Have your agent run your own illustration at 5% before you decide.