No. of Recommendations: 5
IULs get their gains from option spreads, and the options include the dividends.

I know you've said this. But you haven't supplied anything that shows that the IUL terms include dividends. Ray already showed some examples where the dividends are excluded. And here are a few others if you don't want to go back and find his post:

AXA: (bolding added)

One-Year Options:

U.S. Large-Cap Index
Choice S&P 500 Price Return index
S&P 500 Price Return index

U.S. Small-Cap Index
Choice Russell 2000 Price Return index
Russell 2000 Price Return index

International Index
Choice MSCI EAFE Price Return index
MSCI EAFE Price Return index

Three-Year Option: (not available in NY)

U.S. Large-Cap Index
Choice S&P 500 Price Return index
S&P 500 Price Return index

And in this Allianz brochure all of the methods of calculating say that they "track changes in an index". Since it doesn't say if the S&P 500 index that it's tracking is the 'price return' or 'total return' index, it's not clear if it includes dividends or not. However, since the S&P 500 index that most people are familiar with and that gets quoted as the 'S&P 500 index' is the price return index, I doubt that it's the total return index that is being tracked, since it doesn't specifically say 'total return'.

The S&P 500 returns quoted on this Hartford IUL page are the price return gains/losses.

So, while the insurance companies may receive the dividend income from their investments, not all of them pass the dividend income along in their IUL income.

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