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Jan 26, 2022 by |

Los Angeles Financial Elder Abuse Attorney: Senior Consumer Problems With Indexed Universal Life Policies

ATTORNEY NEWSLETTER

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.

Contact Us

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:info@evanslaw.com”>info@evanslaw.com</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

Athene USA

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

PacLife

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.

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