If internal policy costs are higher than the rate earned in a particular year, your cash value can go backward. Why does it matter? If cash value were just a side bonus like a decoration, it would only become a cosmetic problem. Don’t confuse not losing money in the index and your cash value remaining the same. * IUL’s do not have guaranteed cash that increases every year all the way to endowment Girard Sharp has earned national Tier 1 rankings for Mass Tort and Class Action Litigation and has been named to the U.S. News – Best Lawyers “Best Law Firms” list each year since 2013. Protect your rights by speaking with a Girard Sharp consumer protection attorney—dial (866) 981-4800 or submit your information below. 6. The ambition is to get higher returns than in whole life, but not take on the risk and volatility of variable universal life, where your money is invested in the market directly. Great read. You have to pay premiums as illustrated and on time. The insurance industry will be watching closely in the coming months as a class-action lawsuit over an indexed universal life policy plays out in a California courtroom. Explaining Indexed Universal Life (IUL) Insurance. These annually rising costs are a risk inside th policy, creating two significant problems for the policyholder. The WL sold at that time didn’t live up to their non-guaranteed projections either. However, IULs have significant risks that prevent it from being compatible with Infinite Banking. I’ve seen it happen many times with many well-intentioned people. This article is separated into three sections. Girard Sharp is a national law firm committed to protecting the rights of individuals, businesses, and institutional clients in courts and arbitral tribunals across the United States. That means the only way to have the policy perform as expected is to have the cash value growing faster than the internal expenses, so it’s enough to cover policy costs. No question. Rather than growing based on a fixed interest rate, it’s tied to the performance of a market index, like the S&P 500.. Some customers in this situation have been surprised to see rate increases of over 200%! Some IUL products build in a slightly more attractive floor. And yes, with an IUL, you do have that flexibility. Don’t overlook EIUL policy loan risk. While it appears that this means your cash value cannot go down, there’s more to the story. 2) Neither you nor the insurance company can guarantee that an overfunded IUL will outperform an overfunded whole life policy. That’s the most dangerous type of lie – the one camouflaged with the truth. One reason is that the interest projections are a fixed compound rate rather than actual index performance https://themoneyadvantage.com/real-rate-of-return-average-is-not-real/. * IUL’s do not have guaranteed premium In fact, it has never happened. After paying for the cost of insurance, your premiums cover the fees. All Rights Reserved. The reported issue is that insurers seem to be using these bonuses to deceive consumers by illustrating returns at rates higher than otherwise contemplated by a 2015 actuarial guideline, and the insurers do not clearly disclose that the advertised returns are based on that higher, non-guaranteed amount. The "hot" product on the market isn't necessarily the best product for you. They may even raise premiums above what’s illustrated, requiring more dollars due, to keep the policy in force. Otherwise, the policy will eventually lapse, or they’ll need to surrender it and take out whatever cash value is left (and probably owe taxes on that money). This general lack of guarantees makes for watery promises in a policy that that seems afraid to commit. Read about some of our results. However, it’s just one step in the bigger journey to time and money freedom. Another shows a more mid-line interest rate projection. For instance, if you started the policy when you were 25, that year’s term life cost was minimal. Surrender fees are horrendous this is where life companies are making a lot of money by keeping innocent investors monies when they cancel their plan due to financial hardship and it happens to be in the first 5-10 years depending on the contract they lose it all. If a lawsuit can be filed, indexed universal life insurance policyholders may be able to recover compensation for any harm they suffered in buying these policies. Over time, costs eat up a bigger portion of the premium dollars. Model the successful few, not the crowd, and build a life and business you love. Success leaves clues. Growth in the cash value of an IUL is linked to a stock market index and capped such that the interest credited to an account cannot be less than 0%. What you will read in this newsletter is a classic example of me helping an IMO and ultimately hundreds of agents from getting caught up in the lawsuits that are now flying. Conversely, if the index dropped from 2000 to 1800, that would represent a -10% loss. A lawsuit could also help enact change in the industry – and stop insurance companies from engaging in … IULs don’t count the dividends. Life insurance is a tool that you want to know you can rely on. The insurance company also reserves this right, and they can change them in the other direction. The point is that a dollar figure is reliable, but a guaranteed rate applied to a tiny sum isn’t much to brag about. It offers flexible premiums, a death benefit, and the potential for cash value accumulation. IULs flaunt their flexible premiums. While the premiums show a level rate, more of the premium dollars cover this internal costs, the longer the policy is in force. 1. All life insurance policies face the exact same mortality costs. Universal life is simply a cash cow for the life company. And if you stop paying early by reduced paying up, your death benefit will drop to the level that your cash value can fully purchase at that time. Or talked into … And there’s the appearance that you can’t lose money because of “downside protection and upside potential.” Comparatively, whole life can look expensive and pretty boring. Indexed universal life insurance doesn’t have a guaranteed premium, guaranteed death benefit, or guaranteed cash value. One (non-guaranteed) column outlines how your policy will perform at a fixed interest rate. Even if you do everything right, especially paying premiums exactly as illustrated, the environment of IUL is not conducive to delivering on its promises. Girard Sharp is investigating reports that certain providers of Indexed Universal Life Insurance (IUL) policies, such as Pacific Life Insurance Co. and Lincoln Financial Group, are allegedly misleading customers with unrealistically high cash-value projections in policy illustrations. IUL policies are tied to the performance of a stock market index. It’s built on a chassis of annually renewable term insurance, with a cash value savings component. Learn More Thank you for commenting! Ultimately your credibility is at stake, just like Dave Ramsey who gives his listeners the misconception that all permanent life insurance is a waste of money. What does it mean? And until you dig deep, EIUL appears to have it all. Low contributions to cash value wouldn’t be a problem if the index performance provides strong positive growth each year. One was leveled against Life of the Southwest in California, alleging that the company’s … These risks are causing many people to be in danger of losing policies they’ve paid into their whole lives. Indexed universal life insurance, or IUL, is a type of universal life insurance. It reads, “you never lose your investment if you use Universal Index insurance, the money can only grow, even at a slow pace, never go down.”. That’s why you need a guaranteed dollar amount of cash value. While there’s an element of truth here, there’s more myth than fact in that perception. […] while that may be true on paper, in practice, it can be much more of a risk. So rising costs create the second problem of hamstringing the backup funding source. Universal life was invented in the 1970s and comprised 25% of life insurance policies purchased in the 1980s and 1990s. According to recent reports, however, these bonuses do not guarantee a substantial return, particularly when the stock market is down. Whole life endows, while IULs do not. If you care to have an agent as a guest on your show to defend and explain investment-grade IULs, I will put you in touch with mine who is both an investor and a retirement planning strategist. As the policy matures, the costs may rise to meet or even exceed the premium payment for that year. At some point in your Infinite Banking research, you’ve probably even heard about using IULs instead of whole life insurance. Would you rather have a guaranteed cash value dollar amount or a guaranteed minimum interest rate on a potentially skimpy cash value? Then, you can ensure you’re setting yourself up with the solid ground of certainty and guarantees. Ask yourself, who is assuming the risk? While indexed universal life is classified as “permanent life insurance”, it isn’t truly permanent. Finally, for a balanced approach we offer the disadvantages of IUL insurance as well. Not only does it provide the peace of mind of protection, but it can also be used as your cash flow management system. Universal Life Insurance Lawsuits. An indexed universal life policy is tied to a stock market index such as the S&P 500. Delivering only one side of the issue only serves to confuse consumers and investors who don’t know enough about insurance to separate fact from fiction. I would guess that you have not sat across from a family who was sold an IUL that did not perform as illustrated and now it will lapse if they don’t put considerably more money in it. Or talked into … Then you won’t get FOMO (fear of missing out), even if your brother, friend, or someone else online says its best. It’s likely prepping a class-action suit against the carriers of Universal Life insurance products, which includes that FFIUL. * IUL’s do not endow. Unfortunately, many people have proposed Indexed Universal Life be used for Infinite Banking, because of its assumed cash value accumulation. You state “I sell much more IUL than WL because clients understand that overfunded policies are not the same as minimally-funded policies. Indexed Universal Life is a form of universal life insurance. John Hancock Life Insurance Co. settled a lawsuit related to UL insurance costs in July for $91.25 million. The gains are then applied according to your participation rate. Additionally, I want to know that my cash value (emergency/opportunity fund) will be there for me. Axa Equitable Life Insurance and Lincoln National Corp. are also facing litigation for raising the costs of their universal life policies. One WSJ article cited case after case of universal life policy owners who are facing rate hikes. That would mean that all the premiums you’ve paid in over the lifetime of the policy have evaporated into thin air. Now, while the index could excel and your IUL could hit the caps and max out every year, this is highly unlikely. A lawsuit could also help enact change in the industry – and stop insurance companies from engaging in … That means your real growth rate may be sub-zero. Get an in-force illustration, and compare it to the original illustration that was used to sell it in the first place. Over the past two decades, Girard Sharp lawyers have earned a distinguished reputation in the representation of plaintiffs in class actions and other complex litigation. Universal life is simply a cash cow for the life company. More specifically, these policies – which are predominantly similar to traditional universal life … 7. Earlier, we talked about the floor, or the minimum rate baked into most IUL policies. Finally, you put your money to work, increasing your income with cash-flowing assets. If it shouldn’t lapse then why doesn’t the insurance company guarantee that it won’t lapse? The devil is in the details, and when you really examine them, it becomes clear that these are products designed to be sold, not bought. On the illustration, you’ll usually see three columns of figures. As a result, you could actually having your cash value diminish from one year to the next. The term life insurance cost in the same policy 15 years later will be much higher. Nelson Nash, the Father of the Infinite Banking concept, insisted that it only works with a particular type of life insurance policy and design. IUL’s sacrifice Safety to get Growth by transferring risk to the policyholder. Taking all these factors into consideration together, you can see the writing on the wall. You have probably heard that “the stock market returns 10% in the … If any one of these elements breaks down, the contract breaks down as well and leaves you with a lot of uncertainty. So the number of people who … That’s something you can plan for. We said Nelson Nash did not allow authorized IBC Practitioners to use IUL’s for the Infinite Banking Concept. 5. We’ll expose the truth about IULs and show you the darker side of the inner workings of these insurance policies. Rachel helps her clients create time and money freedom with cash flow strategies, Privatized Banking, and alternative investments. Indexed Universal Life pros and cons are typically exaggerated by both sides with agendas to either sell an IUL policy or against it. It’s your roadmap to take you from just surviving, to a life of significance, purpose, and financial freedom. Here’s the litmus test you can apply to any life insurance policy to ensure you are getting a policy you can count on. Because a UL does not endow you can only reduce the death benefit to try to preserve the policy. Because Whole Life endows you can reduce the death benefit amount so it is GUARANTEED paid-up. The question is simple. However, looking further at the IUL illustration, you’ll probably see a year when all the values reset to zero. That looks like a perk at first blush, but it can be used against you. Endowment is when the cash value equals the death benefit and the company pays out the death benefit to the insured. One is guaranteed the other one is not. The guaranteed column is the one with the bare bones minimum rate. Additionally, whole life guarantees a minimum net return, while IUL may have a guaranteed minimum rate. However, even if the interest rate guarantee is 2%, it’s still possible that your cash value may stagnate or even drop. If you purchased an Indexed Universal Life Insurance policy after 2015 and believe you may have been misled, you may have a claim for relief. A Specially Designed Whole Life policy has guaranteed premiums – guaranteed never to increase. If you purchased an Indexed Universal Life Insurance policy after 2015, you may have a claim for relief. Indexed Universal Life is a form of universal life insurance. That’s because premium dollars first cover the costs and fees of insurance, and then spill over into the cash value reservoir. You said that Nelson Nash prohibits infinite banking representatives from selling IULs, but you didn’t disclose if that is you. In a follow-up episode, we’ll talk with Todd Langford, the creator of Truth Concepts, to further dissect the truth about IUL’s mathematical and statistical faults. Protect your rights by speaking with a Girard Sharp insurance attorney (dial 866-981-4800) or by submitting your information above. For Indexed Universal Life Insurance to work in your favor, you have to assume many factors going precisely according to plan, all of the time. That means that the premium may become insufficient to cover even the basic cost of insurance. You do have flexibility in how you make payments. I hope that this discussion helps you answer for yourself and feel settled about why you’re not choosing an IUL policy. That means your cash value doesn’t grow at all. That’s why IUL illustrations list those projections as non-guaranteed values. So, the policy has rising internal costs, making it more expensive to maintain the longer it’s in force. Indexed Universal Life Insurance Lawsuits. Because parts of it are correct, it’s harder to recognize, and often tricks people into the wrong conclusions. What exactly do you think is different in the WL? The first stage is the foundation. Today’s conversation will uncover IUL risks so that you can avoid the trap of unfulfilled promises. You keep more of the money you make by fixing money leaks, becoming more efficient and profitable. Rachel is the co-host of The Money Advantage podcast, the popular business and personal finance show. Get the latest insights from our lawyers and leading publications. Privatized Banking needs guaranteed premiums, guaranteed value, and guaranteed death benefit. Sound too good to be true? It should. Indexed Universal Life: the Good, the Bad, and the Ugly Katie S. Lott, Christopher J. Finefrock CFP®, MBA, G. Tate Groome CFP®, CLU Indexed Universal Life (IUL) has experienced rapid sales growth in recent years due to its relatively straightforward marketing story: … This would mean that your cash value wouldn’t grow that year. The lawsuit … No contribution limit on policy contributions can make them attractive for tax purposes because of tax-deferred growth. You have to know what’s required of you in advance. Indexed universal life (IUL) insurance boasts the security of fixed universal life policies and the interest-earning potential of variable policies. Universal Life Insurance Lawsuits A lawsuit has been filed by Consumer Watchdog against Transamerica Life Insurance Company, alleging the company violated its … The first section defines indexed universal life and lists our picks for the best IUL companies. Indexed universal life insurance falls under the category of “non-guaranteed” universal life insurance, which comes with a cash accumulation account that is—just as it sounds—not guaranteed. An IUL class action lawsuit investigation is underway to probe into allegations that people who purchased Indexed Universal Life (IUL) insurance policies were misled into expecting unrealistic rates of return that comes after insurance companies presented used fabricated and false illustrations in marketing literature and sales material. That is what has been our experience when we talk to people who bring us their existing IUL’s. It sounds favorable that you don’t have to pay full premiums or can skip payments. In federal and state courts across the country, Girard Sharp has established a record of successful outcomes in class actions and other complex litigation. Some policyholders with IUL policies may have been misled about their policies into expecting unrealistic rates of return based on the initial sales material they were shown. Consequently, we get a lot of questions about whether IULs are better than whole life insurance. ; In the second section, we get into the different indexed universal life insurance pros and cons, starting with the benefits. I removed the links you posted because we do not allow links in comments to things we do not support/endorse. For instance, you can pay the base premium only, pay from policy values, or reduce pay up. That means some people now in their 60s, 70s, and 80s, many on fixed incomes, are being told they need to pony up anywhere from a few hundred dollars to thousands of extra dollars each month for policies they purchased decades ago. Indexed universal life insurance, its sellers say, lets you profit from market gains, but dodge the pain of declines. Podcast: Play in new window | Download (Duration: 40:18 — 46.1MB), Subscribe: Google Podcasts | Spotify | Android | Pandora | RSS | More. Usually, there are caps on the growth, and minimums on losses to protect against market downturns. Lay two overfunded illustrations side by side. If you are still living at that time, the full proceeds would be paid out to you personally. You need a whole life insurance policy that has guaranteed premiums, meaning they’re guaranteed not to increase. For more on this see my comment to Thomas above. If that happens, then the cash value would grow to be able to cover the rising costs. Having your policy lapse is one way you can certainly lose. You could have rising internal costs and a cash value that’s stagnant because of minimal contributions and a flat growth rate. It included both insurance and a savings account that … The crediting rate isn’t net of fees, meaning you still have all the internal costs to subtract out. This extensive article explains what is IUL, how it works, and the pros and cons of an indexed universal life policy. It’s like you’re holding a stick burning from both ends. Life insurance is a critical part of your financial life. Clearly, the podcast and this article are controversial because the definition of controversial is: “giving rise or likely to give rise to public disagreement.”. 4. If you have been captive, selling whole Life policies as a superior product, then you have an automatic conflict of interest built in to your company and a cognitive dissonance from ever being able to correct your error. With guarantees and certainty, you can use your cash value life insurance policy as the cornerstone of your cash flow and wealth generation system. And the third, the guaranteed column, will show your expected performance if your interest rate is the minimum growth rate. Despite the popularity of these policies, some of IUL’s dirty laundry has been coming out of the closet. Indexed Universal Life: Dangerous Truths About IUL Risks, Free Quick & Easy Privatized Banking Guide, Where Life Insurance Fits into the Cash Flow System, Many Beliefs About Indexed Universal Life Are More Myth Than Fact, Minimum Crediting Rate Is NOT Net of Fees, IUL Risk 2: Flexible Premiums Can Be Used Against You, Annually Renewable Term Insurance Has an Annually Rising Cost, Higher Costs Slow the Buildup of Cash Value, Indexed Universal Life Premiums May Become Insufficient to Cover Costs, Premiums, Cash Value, and Internal Growth Must Cover the Increasing Internal Charges, You Might Have to Pay Additional Premium to Keep the Policy in Force, IUL Risk 4: The Policy May Not Last Your Entire Life, Bottom Line: Indexed Universal Life Policies Lack Guarantees, Ensuring Your Policy Will Work for Infinite Banking, Guaranteed Cash Value Dollar Amount, Not Guaranteed Interest Rate, Universal Life Insurance, a 1980s Sensation, Has Backfired, A Problem with Life Insurance That’s Universal, earn returns in two places at the same time, Specially Designed Life Insurance Contracts (SDLIC). Indexed universal life (IUL) insurance policies put a portion of the policyholder’s premium payments toward annual renewable term insurance with the … Indexed universal life insurance (IUL) is an insurance product that seems to promise you can have your cake and eat it, too. The life insurance company recognizes a shorter period that you’ll be paying premiums before they will be paying out the death benefit. They were sold in an era when interest rates where very high. I want life insurance that I know will be there for me, not likely/maybe be there for me. So, it seems like you’re getting the best of both worlds: a strong growth rate and no losses. The lawsuit … Premiums can be lower than traditional universal life insurance plans. If the I sell much more IUL than WL because clients understand that overfunded policies are not the same as minimally-funded policies. Let’s unpack the IUL a bit to understand why. If you pay for the policy during your whole lifetime as illustrated, your beneficiaries will receive a guaranteed dollar amount in life insurance proceeds when you die. Structured payment streams and IULs do NOT mix! Rachel Marshall is the Co-Founder and Chief Financial Educator of The Money Advantage. Indexed Universal Life is a complex product with many moving parts. That’s why it’s so important to make sure the policy you use can become a cornerstone of your wealth creation. Indexed Universal Life is a form of universal life insurance. It’s a type of “permanent life insurance” that is intended to last your entire life. With Whole Life, the cash value is guaranteed to increase every year by a minimum dollar amount, and the policy is guaranteed to endow. Lieff Cabraser Heimann & Bernstein (LCHB) is one of the leading plaintiffs’ firms in the country. Through higher-than-agreed-upon premium payments. The fact of the matter is that an IUL policy may lapse, even if you follow all of the rules and pay premiums exactly as illustrated. It’s built on a chassis of annually renewable term insurance, with a cash value savings component. I suspect it’s because we all want to believe there’s a “magic pill” answer to the volatility of the stock market. Finally, for a balanced approach we offer the disadvantages of IUL insurance as well. However, the cash value is a functional and necessary part of the policy, because it’s also the backup source for covering internal costs. Lucus – You clearly do not understand how IUL or even whole life works, for that matter. If it’s likely to snap and break, it can hardly be called a walking stick. Do you feel like you’re too old for the Infinite Banking Concept (IBC)? The key is in your words, “shouldn’t lapse.”. And we’re not the only ones raising red flags about Indexed Universal Life. You started off the podcast saying that your content would be controversial but you only provided one side of the discussion. However, IUL can’t deliver the bedrock of guarantees and certainty you need for Infinite Banking to work. More specifically, these policies – which are predominantly similar to traditional universal life … She is known for making money simple, fun, and doable. The plaintiffs allege that PacLife designed and marketed this product specifically … An overfunded IUL will outperform an overfunded WL. First, it can slow the buildup of cash value. It would have been much better if you had had an agent on the podcast with you that could address your concerns as well as your misconceptions. Are you considering whole life insurance and want to know which is better: Direct vs. non-direct recognition? Protect your rights by speaking with a Girard Sharp insurance attorney (dial 866-981-4800) or by submitting your information above. Be aware of the EIUL lawsuits EIUL Insurers Face Class Action Lawsuits. Indexed Universal Life Insurance Policy Investigation. A whole life policy, whether it is max funded or minimally funded, still has a guaranteed cash value dollar amount (guaranteed to annually increase by a minimum dollar amount) and a guaranteed death benefit to endowment (typically age 100 or 121). Even if your policy’s floor is 2%, you have to remember that there are internal costs of the policy. However, there are two sides of the contract, and you’re not the only one with the liberty to change the premiums. For a free consultation about your potential claims, contact one of our public protection attorneys at (866) 981-4800 or fill out the form toward the top of this page. Surrender fees are horrendous this is where life companies are making a lot of money by keeping innocent investors monies when they cancel their plan due to financial hardship and it happens to be in the first 5-10 years depending on the contract they lose it all. North Carolina provides favorable treatment for potential parties to an index universal life insurance lawsuit. It’s a type of “permanent life insurance” that is intended to last your entire life. Life insurance is part of Stage 2, protecting the wealth you’ve built. That means the proceeds will pay out, no matter when you die. Check your email inbox. With rising internal costs and a flat premium, where does the money come from to cover those costs? This is most likely in the later years of the policy and can cause losses in cash value. Sales of indexed universal life insurance have been booming, but buyers may have been sold on policy projections that won't come true. That means that there’s no cash value and no death benefit. YOU are the one that clearly doesn’t know what you are writing all this ongoing jargon about! https://themoneyadvantage.com/real-rate-of-return-average-is-not-real/, Flexible premiums can be used against you, Guarantees in the policy can be eliminated if you do not follow the contract perfectly. Either pay the inflated premiums or give up the policy altogether. If you purchased an Indexed Universal Life Insurance policy after 2015 and believe you may have been misled, you may have a claim for relief. Even if you max fund an IUL, never miss a payment or pay late, and pay the extra fee for a rider to guarantee the death benefit to a specific age, you still don’t have a guaranteed cash value dollar amount. No question.”. If the floor is 0%, you’ll see a corresponding 0% growth in your cash value. For instance, if the index were at 2000, and rose to 2200 12 months later, there would be a 10% gain in the index. We are independent agents and advisors that work with multiple companies (not captive) and we are not limited to only selling the Infinite Banking Concept. Even though there may be a interest rate guarantee in your IUL policy, internal expenses can be higher than the growth. Why would anyone want to buy a policy that has as many pitfalls as Equity Indexed Universal Life? In any asset, you can only maximize 1-2 out of the following 3 things: Safety, Liquidity, and Growth. This means that for cash value to rise to meet the death benefit at a future date, exact cash values must be reached each year. The only way to get the benefit of uninterrupted compounding and earn returns in two places at the same time is with a policy that has predictable future values. IUL is attractive because of the assumptions that you get a policy that lasts your entire life, higher growth rates than with whole life, where you can pay flexible premiums, and not lose money. We’ll review your situation to help you decide what moves are best for you. Probably see a year when all the premiums you ’ re not talking a... Case of universal life be used for Infinite Banking research, you ’ setting! Me explain how this IUL ( indexed universal life was invented in the index performance provides strong positive growth year. ’ ve paid in over the lifetime of the policy paid in over the lifetime of Southwest! Growth for Safety and Liquidity any day some customers in this case, you more. That I know will be paying out the death benefit bonus like a perk at first,! Costs create the second section, we ’ ll highlight the reasons why we ’! Is what has been coming out of the premium may become insufficient to cover the fees – guaranteed never increase. No guarantee that an overfunded whole life places the risk UL policy specifically! Advantage, LLC, for a period of time detail in what Kind of do. 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