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Feb 9, 2022 by |

San Mateo County Financial Elder Abuse Attorney: Problems With Indexed Universal Life Policies


Complex Policies Not Easily Understood

Return Calculations Complicated 

Surrender Penalties, Increased 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.  One observer put it this way: “[IULs] are complex products sold with false promises and deceptive marketing,” according to Birny Birnbaum, director of the nonprofit Center for Economic Justice. “Stay away from them.”   Fortunately, California law and Financial Industry Regulatory Authority (FINRA) regulations protect consumers, especially those over age 60, from dubious sales tactics and sales of unsuitable life insurance and annuity products.  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 San Mateo 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. 

How IUL Returns Are Calculated

Under an IUL policy, the carrier takes yearly interest income from the bonds and mortgages underlying the policy and invests that interest in options on one or more indices which have been chosen by the policyholder. The insurance company manages and buys the options, rather than the policyholder, who expects to see additional gains in value while keeping the basic policy investment safe.  But there is a price for this “management” by the carrier of your money; IULs include significantly more fees and costs than the average life insurance policy.  According to an industry analyst, one insurer charges up to 8% of the premiums and cash value in the first year alone.  Any fees, particularly upfront fees like that, threaten to drain your policy’s cash value over time especially when your chosen index falls and the returns plunges to zero.  If internal costs cause the policy’s account value to drop too much, your premiums will increase.

Increasing Premiums, Policy Lapses And Surrender Charges

If you don’t keep paying the higher premiums to keep an IUL in-force, the policy may lapse and you risk losing all previously paid premiums, as well as the death benefit going forward.  Even if the policy remains in force but you elect to surrender it, 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. Any surrender charge is a direct reduction of whatever return you may have received on your invested premiums.  You may also be taxed on the amount you receive in any surrender over the cash basis (what you paid in premiums) at regular income tax rates.

Contact Us

If you are over 60 and live in San Mateo 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=””></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


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 Company

World Financial Group Insurance Agency, Inc.

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