At first glance, Indexed Universal Life Insurance sounds like a dream come true: guaranteed market returns on your life insurance and a solid floor to prevent you from losing your primary. But there’s a reason some Insurers are pushing Indexed Universal Life policies: they don’t perform the way they claim, and they give executive more leeway with spending your money. At best, Indexed Universal Life policies can match the performance of Whole Life Insurance Policies, and at worse they dramatically underperform in comparison. There are a few major reasons for this, and together they make a compelling argument to avoid Indexed Universal Life policies.
To start with, if something sounds too good to be true, then it probably isn’t. Insurers put a cap on returns for Indexed Universal Life policies, so that if the market has an incredible year, all the returns above a certain threshold go directly to them. There’s a reason companies are training their salespeople to push Indexed Universal Life insurance, and it’s not for their customer’s benefit. In addition, your Insurance policy doesn’t benefit from dividends, which also go into the company’s coffers. Over the course of a customer’s life, those dividends add up to a sizeable chunk, and none of it goes to the person whose money is being invested. Finally, the “participation rate,” essentially takes another 20% or so off the top, just to add insult to injury.
Many companies are increasing sales of Indexed Universal Life Insurance Policies, including Minnesota Life, Penn Mutual Life, Midland National Life, National Life (VT), AXA Equitable Life, Lincoln Financial, Pacific Life, Transamerica Life, and John Hancock Life. They offer it as a more flexible alternative to traditional Life Insurance Policies.
Indexed Universal Life Insurance Policies are popular among companies not because they offer a higher rate of return for consumers, but because they allow executives to increase their profit margin and free up the vast reserves that are intended to pay insurance claims. If you or a loved one has purchased an Indexed Universal Life Insurance Policy that you may have been improperly administered, contact the Evans Law Firm at (415) 441-8669.
The Evans Law Firm handles elder abuse (physical and financial), annuity and long term care fraud cases committed against senior citizens, elder law and estate planning (including living trust and will packages, powers of attorney, probate matters, Medi-Cal planning, estate administration, trust administration, will and trust contests, specialized trusts including special needs trusts, and conservatorships), consumer fraud class actions involving \ insurance and banking fraud claims, as well as Qui Tam (whistleblower/false claims), IRS tax fraud lawsuits, securities fraud whistleblower reward lawsuits and FINRA arbitrations, retaliation and employment litigation.