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Nov 4, 2015 by |

Attorneys Weigh in on IULs


The Indexed Universal Life Insurance policy is a recent invention, only coming into existence in the last decade or so. Traditional life insurance can be traced back for centuries, and is among the most regulated and carefully monitored financial product in existence. Considering that, what’s the advantage of this new form? Who is it for and that does it do? In this post, we’re going to look at how indexed universal life insurance is supposed to work, and then at how it actually does.

The Theory

Indexed Universal Life insurance is response to the criticism, real or imagined, that life insurance policies were missing out on the fantastic growth of the financial market. By maintaining the majority of investment in bonds and other low-yield products, life insurance policies kept a low growth profile compared to skyrocketing stocks. Indexed universal life insurance is supposed to solve this “problem” by combining the certainty of life insurance with the returns of stocks. But of course, there’s a tradeoff that insurers often neglect to tell their customers.

the Reality

In practice, indexed universal life insurance nearly always underperforms traditional life insurance, and when it does outperform it, insurance companies reap the bulk of the profits. What they do is essentially put a floor and ceiling on your returns. The floor is far lower than the floor of a traditional life insurance, and the ceiling caps your earnings before you would get the kind of returns that would justify the risk that accompanies indexed universal life insurance. Thus, these policies consistently provide lower returns and higher risk, rather than the opposite, as they promise.

Why they Sell

If they don’t provide any value to the average consumer, why do these sell at all? The answer is marketing: indexed universal life insurance was originally targeted at higher income individuals, who wouldn’t be betting their entire future on the policies. They could afford the risk, and were willing to risk lower returns for a chance at market level earnings. However, the success of indexed universal life insurance, and the resultant boom in income for insurers led to increasing sales of these policies to those who counted on their life insurance providing for them down the road. By selling it as a savvy financial decision for those with an insight into the market, they sold it as a thinking man’s life insurance.

Broken Promises

The greatest risk of indexed universal life insurance is that it makes promises it can’t keep. Consumers are shown predictions of returns based on wildly inaccurate information, best-case scenarios, and fudged data. After investing for years, people often find that their policy never matches any of the goals that they were shown when they purchased it. If you are making long-term financial decisions based on inaccurate information, this can throw your finances into disarray. If an insurance salesperson is showing you only predictions based on a skyrocketing market, even a mild economic shortfall can wreak havoc on retirement planning.

The Biggest Sellers

Companies are raking in billions selling IUL policies, and that number is only growing. Among the major sellers are Accoria Life, Pacific Life Aegon, National Life Group, American General Life, AXA US, Minnesota Life, Allianz Life, Penn Mutual, and Fidelity and Guaranty. These companies sell around $5,000,000,000 worth of IUL policies each year, and as the popularity of this product continues to grow, that will likely become even more in the upcoming years. However, lawsuits surrounding this issue may prevent consumers from continuing to buy indexed universal life insurance, and attorneys and financial planners may advise their clients against purchasing them.


Contact Us

Evans Law Firm is a plaintiff’s firm specializing in insurance and banking fraud, consumer rights, and IRS and SEC cases, as well as elder law, whistleblower, and class action cases. If you believe that you or a loved one may have purchased an indexed universal life insurance policy under false pretenses, or one which was improperly administered, call Evans Law Firm at (415) 441-8669, or email

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