Life insurance is one of the first things people purchase when they start a new job or strike out on their own. Purchasing a life insurance policy is one of the easiest, most secure ways to plan for your future, and offer you an option to continue to provide financial support for your loved ones, even after your death. But because the life insurance policy business relies on a variety of features, namely equities, investments, and the changing financial market, often, consumers run the risk of purchasing a fraudulent policy and never discovering their mistake until it is too late.
What is Indexed Universal Life Insurance?
Indexed universal life insurance is similar to universal life insurance, but with a few key differences. Santa Clara County securities fraud attorneys note that these differences are key to understanding how an indexed policy could be used against you. Universal life insurance takes a variety of forms, from a basic, no-frills, fixed-rate insurance policy to the variable models which give policy holders more options for investing in a number of equity accounts. In contrast, indexed universal life insurance offers policy holders two options—allocate cash value amounts in either an equity index account or a fixed account. If you opt for an equity index account, there are several popular indexes to choose between (Nasdaq 100, S&P 500, etc.).
An indexed policy allows the owner to decide how much to contribute to fixed and indexed portions, and typically, the provider guarantees the principal amount in the indexed portion, and places a cap on the maximum return that can be earned on that account. Because the policies are considered “hybrids” of the universal life insurance policy world, they are not as costly as others on the market, usually due to the lack of management needed to maintain them. However, the smooth sales pitch of a cheap, profitable universal life insurance policy only goes so far and is ripe for fraudulent activity.
Securities Fraud and Indexed Universal Life Insurance Policies
The problem with an indexed universal life insurance policy is its reliance on stock market growth to promise its policy holders exponential returns. Even if the policy is legit, the promise of benefiting from market gains without taking a hit (even if the market does), is largely false. The insurance provider cannot guarantee the market values, and growth does not simply compound over the years. In addition, the indexed policies will be reassessed each year, causing the policy premiums to increase each time.
At the Evans Law Firm, Inc., our securities fraud attorneys in Santa Clara County have seen too many family members struggling to wade through fraudulent paperwork and policy promises after the death of a loved one, trying to figure out how to cash out an insurance policy to help with costs, only to find that the policy itself is a lie or that the high premiums have not accumulated enough over time. To avoid this situation, when choosing your life insurance, you should be aware of the schemes out there, and the pitfalls of even the most legitimate options, such as indexed universal life insurance.
To discuss insurance policies and your options, contact us today at 415.441.8669 or online at www.evanslaw.com.