The Problems Associated With Indexed Universal Life Insurance (IUL)

Indexed Universal Life Insurance (IUL)

As individuals age, their mind often wanders to how they will pay the bills after they retire. An option often presented to them by or insurance agents or companies is an indexed universal life insurance policy, which promises a reliable death benefit with a cash component, which looks more like an investment than an insurance policy. Yet, it is important to understand why policies like these are not always the proper fit.

The Problems

Although there are many, we want to focus on the most pressing of the issues associated with indexed universal life insurance policies. For one, these policies are horribly complex. Although an agent can tell a buyer that they will see returns of x-percent, there is never a guarantee. The rosier the promised return, the more wary a buyer should be.

These policies also come with something called “cap rates,” which operate exactly as they sound. Essentially, these policies are bound to only collect a maximum rate from the stock market increases. If your policy has a 10% cap, then if the market increases by 30%, you are given your 10% only. Even casual investors may do much, much better with their investments dollars than an insurance company can.

And the additional features you may be offered are often frankly not worth the additional premium charges. For example, you may not need a guaranteed death benefit as part of your policy. So why pay extra for it? Be sure to educate yourself on what policy features are most suitable to your own situation, and don’t be talked into buying policies that you neither want nor need.

What This Means

Do what is right for you. Often, these policies are sold under the assumption that they are the “best” or “most reliable” or “diverse” policies that someone can put their money into. Understand the risks associated with these investments in order to save money and live happier as you age.

Some of the major annuity and life insurance providers in California are:

• Pacific Life Aviva
• Athene
• Accordia
• Minnesota Life
• Aegon USA
• National Life Group
• Penn Mutual
• Old Mutual Financial
• Midland National Life
• Allstate Life
• North American NACOLAH Life
• Transamerica
• Nationwide
• Voya

Contact Us

Evans Law Firm, Inc. handles annuity fraud and insurance fraud cases and lawsuits in Los Angeles, CA and in all other counties in California as well. If you have purchased an annuity policy or indexed universal life insurance, or are considering purchasing one, and would like to know whether it is a suitable investment for you, contact Evans Law Firm, Inc. at 415-441-8669 or via email at info@evanslaw.com.