Indexed Universal Life Insurance Insanity!

There is a reason most life insurance agents never make it to their 2nd year in the business and it isn’t because they’re stupid or life insurance really doesn’t have the potential to be a well paying lifetime career. The lack of long term success for agents really hinges on several things, but I think first and foremost, there are a chain of failures on the part of the insurance companies that actually propagate a chain of failures for new agents.

1. With the exception of a few career (captive) companies there is very little up front training. A new agent can expect to learn the basics of a company’s most profitable product and then go along on a few appointments with one of the very few agents that survived the first year on a few appointments. The surviving agent will show you how to steer a client toward what they want to hear and how to steer the client far away from what you don’t want them to get their teeth into. In the case of indexed universal life, the topic of this post, they will teach you about assumption selling, version 1, the version that makes people start daydreaming about dollar signs and vacations and retiring. They will show the agent how to get and keep that “no pain, no gain” mindset and steer clear of the scenarios where there is still pain with no gain, aka version 2, aka policy guarantees and charges.

2. Cell phone companies have friends and family plans. Cable TV has friend and family plans. But little known is the reason most life insurance agents don’t make it in the business. After learning the bare basics they are encourages to buy an indexed universal life policy themselves and then share the brilliance of their financial expertise to the friends and family. Why? Friends and family are generally an easy appointment because you can always just say you’re practicing on them, even though you personally own on of these and think they are the answer for everyone in the world. And friends and family are more likely to give you a sympathy buy than anyone ever in the rest of your life insurance career, no matter how long, or short, that career is. No one after you have exhausted your friend and family pool will ever roll over easily. In fact if you have a large enough family you will find that even those close to you become harder to make an appointment with and way harder to close because those before them have shared the honest layman’s overview of what you did to them. Treated right family and friends can make your career get off to a fast start. Get greedy or try selling them something you don’t truly understand, you’re out of business in short order.

3. The absolute insanity of Indexed Universal Life insurance is like the frosting on the cake for 1 and 2. The companies love it because it is stinking profitable so they are squeezing the marrow out of every agent and especially new agents to sell it. They don’t care if the new agent sells five policies and goes out of business. The play on an agent’s greed. “How hard would it be to sell one of these a month? Do that and make $35,000 a year. One a month. Think about it and remember this is going to make your client’s retirement worries dissolve. They’ll be referring their friends to you and, well, what if you sold four or five a month?”

In your dreams! The truth behind the insanity of IUL is that the desire for it is based in greed, not common sense. The logic to successfully selling IUL is to fill a client’s eyes with dollar signs and don’t let them blink. The reason for selling IUL rather than appropriate life insurance products is high premiums and high commissions. Seriously, IUL is sold as a cash cow that has no downside. The upside, if history repeats itself should produce a 9% return on the cash portion of your policy and just because the company has to ensure they make some money they have to cap your interest gain at 15% in any one year period. OMG! If all of that was true a person would be stupid not to buy it, but reality is just as absurd as those statements the IUL is on a fast track for failure. Just because the cash value has a floor built into it doesn’t mean it will stay a viable product if the floor is ever hit. In most cases if the floor can even be seen from the real interest you earn after fees and the cost of insurance.

Bottom line. The upside? Is a company that is asking you to believe in the solid history of 9% and the belief that 15% is the cap because they have a real concern about earnings being above that living on the same planet as us? Those who push indexed universal life insurance will swear all day on the history of the S&P, and how even with the downturns, over the long run or even short (5 year) run, it leads to a bomb proof 9% assumption. And I have asked the simple question for years. Where’s the proof? Where are all of these IUL insurance made millionaires hiding? If you have questions or would like an evaluation of your current IUL situation or are considering IUL as the answer to your retirement quandary, call or email me directly. My name is Ed Hinerman. Let’s talk.