In September, New York Financial Services began an investigation into the Indexed Universal Life sales practices under the belief that insurance companies selling indexed universal life policies have been providing buyers with misleading information. In selling Indexed Universal Life policies, insurance companies use “illustrations” that contain information about the policy, as well as the potential gains a buyer can receive. However, there are concerns that these potential gains are higher than one can actually expect from purchasing an Indexed Universal Life policy.
Indexed Universal Life policies are permanent life insurance, which means they end when the holder dies. Gains are tied to how well a stock-market index does. The better the stock market performance, the higher the potential gains. Insurers have been projecting a hypothetical interest of 8% a year, going as high as 12%. However, as there are no regulations on projections, insurance companies can provide higher rates than actually expected. Therefore, buyers of Indexed Universal Life Policies risk receiving less than desired.
While investigations are still ongoing, it is without a doubt that there needs to be rules governing what customers of Indexed Universal Life policies are told, in order to make sure buyers are not buying Indexed Universal Life policies based on unrealistic potential gains. In fact, earlier this year, the American Council of Life Insurers submitted to the National Association of Insurance Commissioners proposed guidelines for what insurance companies should tell purchasers.
Potential buyers should also be cautious about the Indexed Universal Life policies itself, not just the fact that projected potential gains may be higher than reality. Insurance expenses increase over the course of the holder’s lifetime. As a permanent life insurance policy, by the time the holder passes away, insurance expenses for Indexed Universal Life policies will likely have increased exponentially. Furthermore, unless the holder has enough accumulated interest to help pay for the Indexed Universal Life policy costs, the holder will have to find funding somewhere else. With Indexed Universal Life policies, holders may risk losing more money than what they actually gain.
If you have purchased an Indexed Universal Life policy in California and would like a free and confidential review of your policy, contact the Evans Law Firm, Inc. at 415-441-8669 or at firstname.lastname@example.org. Some sellers of Indexed Universal Life policies include Minnesota Life, Penn Mutual, Midland National Life, AXA Equitable Life, Lincoln Financial, Pacific Life, Transamerica Life, and John Hancock Life.