The Good, The Bad and The Ugly
The name is catchy. And nobody willingly turns down safety. But here’s what’s going on so you can decide. After all, it is your money, your life, and your life insurance.
The product being promoted is Index Universal Life, IUL for short. IUL products have risks associated with them that participating whole life insurance products simply don’t have. And let’s make something clear real fast here. IUL is BASED on Wall Street performances and IS NOT beyond Wall Street.
But here are some other reasons for NOT choosing IUL for your future needs:
- The owner of IUL policy(s) CAN lose money in years when the index mirrored in the policy’s non-guaranteed returns go down, trades laterally or even when it goes up marginally.
- Recent news reports document how thousands of policy owners’ premiums have been increased because IUL premiums are not fixed level premiums for life like participating whole life insurance premiums are. (You can pay extra for a guaranteed level premium but that defeats the purpose.)
- Regulators in all states have now had to mandate agents and insurance companies to STOP using such high rates of return on their projected values in IUL illustrations. This is because there is no certainty in future market performance. Pathetically, even these mandated rates of return are well beyond actual and compounded annualized growth rates. And so they are still misleading at best.
- Every IUL policy we have ever reviewed here at Life Benefits shows the guaranteed cash values zeroing out prior to the life expectancy of the insured. That means the policy will lapse or the owner will have to continue to pay premiums even though cash values may remain at zero. This is because the cost of insurance in the renewable term insurance, the basis of all IUL policies, continues to increase over the lifetime of the insured.
- Of the IUL policies we have reviewed there are multiple risks (up to 25 in some IUL contracts) that the IUL policy owner assumes. These are risks the insurance company accepts when issuing a participating whole life insurance policy. Because the owner of the IUL shoulders these risks they can lose money, lose the policy, face needless taxation, limit cash value growth and limit their access to the cash values to manage outside the policy with the Perpetual Wealth Code™. Worst case scenario: all of the above could happen.
- All IUL contracts that have been reviewed by Life Benefits offer a guaranteed interest rate in attempts to offset downtrends in the index mirrored in the non-guaranteed accumulated cash values. But insurance companies that sell IUL can choose to credit this interest at will. That means they may credit it to your policy annually, every 5 to 10 years or even wait until your policy is terminated or a death claim is filed. This deferral, at the insurance company’s discretion, can be costly to the IUL policy owner due to the loss of compounding. This is simply NOT a risk worth taking when with participating whole life the compounding is guaranteed and dividends, which are paid annually, add to that compounding effect.
- Finally, the insurance companies control how much gain of the index mirrored is actually shared with the policy owner. In other words, your earnings are capped and the insurance company takes the large profits and pays them to their shareholders (if they are a stock held company) or with their participating whole life policy owners if they don’t have shareholders and/or are a mutual company.
So there are 7 good reasons NOT to allow an agent to sell you an IUL instead of a participating whole life insurance product. Why should you expose yourself to all the above AND lose control over your money for 10 to 15 years while the surrender fees associated with IUL policies expire all while the agent earns 50-70% more in commissions by selling you an IUL policy? It’s your money, your life, and your policy, why allow somebody else to control it. Keep control and realize why utilizes participating whole life insurance to maximize the amount of money you get to keep. Know that having Guaranteed, Available, Manageable, Equity is the key to Winning Your Financial
GAME. And never, ever give the control of your money away to somebody else again because you now know the good the bad and the ugly about indexed universal life insurance.
Special thanks to Dr. Tom McFie