Avoid High-Pressure Tactics And Quick Decisions
Downsides Of IULs For Seniors
Rising Premiums And Policy Lapses
Evans Law Firm, Inc. generally cautions against indexed universal life insurance (IULs) for senior consumers because IULs are expensive, complicated, and tie up invested money for long periods of time. IULs, like deferred annuities, generate substantial sales commissions and agents may pressure consumers for quick decisions based on inadequate information in order to close a sale. Dubious sales tactics, inadequate or misleading information, and sales of unsuitable insurance to seniors constitute financial elder abuse and violations of the California Insurance Code and – when the salesperson is a registered financial advisor – Financial Industry Regulatory Authority (FINRA) regulations. Cal. Welf. & Inst. Code § 15610.30 (definition of financial elder abuse); Cal. Ins. §§ 790 et seq. (Unfair Insurance Practices Act) and 10509 (policy replacement disclosure rules); FINRA Rule 2111(suitability standard for financial advisor recommendations). If you are over 60, live in Los Angeles or Orange County or elsewhere in California and own an indexed universal life insurance policy, call us today at 415-441-8669 (or toll free at 1-888-50EVANS) for a free review of your policy.
Understand How Your Return Is Calculated
When a consumer is sold an indexed universal life insurance, the carrier offers various index funds that the consumer can choose for calculating the return on the premium investment. Understand, however, that you are not making a direct investment in the chosen index. Rather your return will be geared upon the return in that index but will also be subject to a participation rate (meaning you will get less than the actual return of the index) and a cap (which means that your return will be capped at a certain percentage even if the index outperforms the cap). Sound complicated? It is. An IUL operates like a derivative, even though most insurance agents are not trained in how derivative investments work. In short, the agent may not understand what he or she is selling you.
Fees And Increasing Premiums
IUL policies can include significantly more fees and costs than an average life insurance policy. One insurer charges upwards of 8% of the premiums and cash value in the policy in the first year alone. That’s more than most hedge funds. These fees drain your policy’s cash value. If fees cause the policy account value to drop too much, your policy will lapse unless you pay more in premiums to keep the policy in force. Regardless of the fee impact, premiums for IULs policies increase over time anyway. If you don’t keep paying the higher premiums to keep an IUL in-force, you risk losing all previously paid premiums, as well as the death benefit going forward. When a policyholder tries to surrender the policy, substantial withdrawal penalties may apply. This way the carrier – not you – recovers the commission cost paid to the agent who sold the policy. Surrender periods may last for more than 10 years after the policy was taken out.
If you are over 60 and live in Los Angeles, Orange County or elsewhere in the State of California and have an indexed universal life insurance policy, we can review your contract for free. You can reach Ingrid M. Evans at Evans Law Firm, Inc. at (415) 441-8669, or toll free at 1-888-50EVANS or by email at <a href=”mailto:email@example.com”>firstname.lastname@example.org</a>.
Some significant issuers and distributors of indexed universal life insurance in California are listed below. We are not in any way suggesting that any of these carriers or distributors has done anything wrong. The list is provided solely as a reference for our readers.
AIG/American General Life Insurance Company
Allianz Life Insurance Company of North America
American Equity Investment Life Insurance Company
American General Life Insurance Company/AIG
American International Group, Inc. (AIG)
American National Life Insurance Company
Athene Annuity & Life Assurance Company
Athene Annuity and Life Company
Aviva Life Insurance Company
AXA Equitable Financial Services, LLC
AXA Equitable Life Insurance Company/AXA US
AXA Advisors, LLC
Brighthouse Financial, Inc./MetLife
EquiTrust Life Insurance Company
Fidelity & Guaranty Life Insurance Company
Genworth Financial, Inc.
Genworth Life and Annuity Insurance Company
Genworth Life Insurance Company
Guggenheim Partners, LLC
Guggenheim Partners/Security Benefit Life Insurance Company
ING USA Annuity and Life Insurance Company
Jackson National Life Insurance Company
John Hancock Life Insurance Company
Lincoln Benefit Life Company
Lincoln Financial Group
Massachusetts Mutual Life Insurance Company
Metlife/Metropolitan Life Insurance Company/Brighthouse Financial, Inc.
Minnesota Life Insurance Company
Nationwide Investor Services Corporation (NISC)
Nationwide Life and Annuity Insurance Company
Nationwide Life Insurance Company
New York Life Insurance Company
Northwestern Mutual Investment Services, LLC
Northwestern Mutual Life Insurance Company
Northwestern Mutual Wealth Management Company
Pacific Life & Annuity Company
Pacific Life Insurance Company
Security Benefit Corporation
Security Benefit Group, Inc.
Security Benefit Life Insurance Company/Guggenheim Partners
Security Investors, LLC
Security of Denver Life Insurance Company/Voya
Transamerica Life Insurance Company
Voya Financial Advisors
Voya/Reliastar Life Insurance Compan
World Financial Group Insurance Agency, Inc.