Why Is Indexed Universal Life So Popular?

Greed strike a chord with you? After years of looking at indexed universal life insurance and hearing all the arguments and seeing all of failures, it occurs to me that the bigger the cash value numbers an agent can show a potential client, whether they are based in any sort of reality or not, the more the client thinks the agent is a genius. I mean dang. All you have to do is buy life insurance and all of your problems are taken care of. If you die, your family is wealthy. If you live you’re filthy rich. If you need immediate cash you’ll never have to qualify for it again, because you own it. If your dog dies the indexed UL will bring it back to life. If you’re in jail you’ll get pardoned. You won’t even care if you win the lottery because it would just mess up all the money you already have.

But what if your indexed universal life wasn’t the perfect money making machine that it may have been presented as. What if the life insurance agent that presented that bomb proof policy to you sort of left out some details, details that could leave you having spent a ton of money and ending up with no retirement and no life insurance. I remember several years ago American General offering an international indexed universal life insurance policy that wasn’t strapped to the S&P and Nasdaq indeces. It was based on a worldwide conglomerate indeces. The non guaranteed numbers were completely uncalled for insane. If you bought one of these policies for your child at a modest price and all of the assumptions held true they would retired with upwards of $100 million in cash value. That product was on and off the market in fairly short order. I suspect someone suggesed to AIG that showing illustrations with those kind of gigantor assumptions on it might be a little distracting and misleading to the consumer.

So, here we are in 2014 with IUL leading the industry as the most popular life insurance product, just like traditional universal life insurance of the 80’s and 90’s, while interest rates were high. Agents were selling assumptions anywhere from 12% to 18%. The agents never talked about that bubble ever bursting. They didn’t even want to talk about just a little air going out of the bubble. Millions of those policies have tanked and the policy owners have lost untold amounts of premium dollars and when they’re told that the only way to keep the life insurance is to pay dramatically higher premiums, the take their loss and go buy term life insurance or if they still have money and want some upside they put that into traditional whole life.

Bottom line. Those life insurance agents who are enamored by the amount of money they can make selling IUL to a greedy population ignore the fact that investigations and lawsuits are mounting. They continue to sell with assumptions that simply are not backed up by facts. At a time when many of us are adjusting to working versus retiring these people are preying on that sense of loss of opportunity. “Just buy this policy and retirement will magically descend from heaven and give back what our country’s collective greed has taken away, the American Dream. If you have questions or would like a look at your IUL from someone that won’t be pocketing the commission from it, call or email me directly. My name is Ed Hinerman. Let’s talk.