Indexed Universal Life Insurance Lawsuits

Advisors and insurance agents may market indexed universal life insurance policies as the best of all worlds. You are told that you protect your loved ones by providing a death benefit, while you grow your net worth at the same time. Many times these products are sold as “guaranteed income for life.” Insurance agents and advisors sometimes promise the IUL will provide you with “tax-free retirement income for life.” Unfortunately, it will not.

While an IUL may make sense for a very small group of people, it comes with many hidden costs and charges. Even though these costs should always be disclosed upfront, customers are often shocked when they do not see their cash value rising as it should. In some cases, advisors and insurance agents have either recommended an IUL as an unsuitable investment product, or they have failed to disclose all fees upfront.

If you have lost money because you have been sold an indexed universal life insurance product that just does not make sense for you, Rikard & Protopapas can help you possibly recover financial compensation from your advisor or insurance agent through a lawsuit. Contact our experienced litigators to begin your case.

What is an IUL and How Do They Work?

An IUL is a form of permanent life insurance. Unlike a term policy, which lasts for a number of years, an IUL lasts for the rest of your life, so long as you make the premium payments. If the policy declines in value and you stop making premium payments, your IUL will lapse and you will lose all of the money that you paid in premiums.

IULs have exploded in popularity in the last decade, not necessarily because they are a great financial product. Insurance companies and agents make a large amount of money on IULs. There was once only a handful of companies doing business in this space. Now, there are dozens. IULs now hold roughly 25% of the life insurance market, measured by new annualized premiums.

There are two parts of an IUL:

• There is a death benefit that pays your beneficiaries when you die.
• There is a cash value, which is akin to equity and becomes part of your net worth.

The reason why an IUL is called an “indexed” product is because it is tied to the performance of a certain index. In many cases, that index is the S&P 500.

The insurance company will take your premiums (after they take a hefty array of fees) and invest them in some type of options that mirror the S&P. Your cash value grows if the stock market does well. Your cash value will drop if the market does not have a good year.

Just because the insurance says that they invest the money does not mean that you are an investor when you buy an IUL.

Let’s be completely clear about what an IUL is not. An IUL is not an investment product, no matter how much the salesperson likes to tell you that it is. However, salespeople have every incentive to tell you whatever is necessary to get you to put your money in an IUL.

The Company Makes a Lot of Money on IULs (Often at Your Expense)

Your insurance agent or advisor is being paid very well to sell you an IUL. Because of all the fees that the insurance company charges, brokers are encouraged to push these products. In turn, a broker can earn commissions of up to 100% of the first-year target premium that you pay in the first year to begin funding the IUL policy. Depending on the value of your policy, this can be tens of thousands of dollars. The financial payday gives agents and advisors an incentive to recommend this product to you, regardless of whether it is right for you.

Over time, you may begin to realize that the IUL is not performing as promised and that it was an unsuitable recommendation. You may begin to learn exactly how much the insurance company has made off of you. Typically, they have taken the following from you:

• Premium loads, covering the expense to cover policy charges (including the agent’s commission); this fee could be charged on the front or back end
• Monthly charges that you pay for internal costs charged by the IUL insurance company
• Mortality charges to compensate the insurer for what they may lose from your death
• Costs of insurance to keep life insurance in force on you that will go up each year as you age
• Expense charges that you pay over the life of the IUL to the IUL insurance company

It is very hard to get a handle on the exact percentage of fees that you will pay. When you do an internet search, you will likely see many articles trying to sell you on the virtue of IULs, but they are hazy on the exact expenses, and they are biased in their numerical comparisons. What is certain is that you will take a very large hit in the first year.

Many insurance agents and advisors provide illustrations showing high returns in the form of policy loans and the ability to start taking policy loans in year two. Be wary. These illustrations are not guaranteed and are only true if every assumption works perfectly. Nothing works that perfect in the real world.

Insurance Agents and Advisors Do What They Can to Get You to Buy an IUL

Years ago, only a handful of carriers offered IUL products. Now, as more carriers are starting to see the financial benefits of selling these offerings, the market has become more saturated. More sellers mean more schemes, especially as some insurance companies and agents try to get ahead in a lucrative market.

Perhaps the worst practices associated with IULs are the false promises and rosy illustrations that are attached to these products. The agent may pull out spreadsheets with very bullish forecasts that do not accurately portray your actual returns from IULs.

Why You Can Take a Financial Hit from Buying an IUL

IULs are far from the always-profitable product that you are sold on by your broker. You may do well in years when the stock market generates high returns. However, you could take a large hit in poor stock market years, like 2022. Every year, the fees and charges will drag your premium payments down, making this a very expensive “investment.”

If the stock market does poorly enough, the combination of fees and market losses may mean that you must pay even more premiums to maintain your policy, even if you have been promised that your policy is “fully funded” after only a few years of premium payments. You may be forced to make a choice to pay much more in premiums or forfeit your policy. You could even lose the cash value that you have built up or the death benefit that your family was supposed to receive.

Some people are shocked when they get a bill for a higher premium that they cannot afford because they were not told that this was even a possibility. Nonetheless, the agent and insurance company always get paid.

Wrongful Practices Used to Sell IULs

With IULs, the fraud and misrepresentation is almost always in the sales process. Here are some examples of illegal and potentially fraudulent practices associated with the sale of IULs:

• Deceptive sales presentations that fail to disclose the costs and risks associated with IULs
• Recommending that customers borrow money or take equity from their homes to purchase IULs
• Recommending IULs for older customers who would not live long enough to recoup the high front-end costs and may have to pay prohibitively high premiums
• Selling an IUL as an investment plan, as opposed to a life insurance policy with a cash value component that can vary based on an index’s return
• Mischaracterizing key terms of an IUL
• Including complex terms in an IUL and not fully explaining them to customers (or outright lying about them)
• Using dubious funding schemes, such as a “structured cash flow,” which is nothing more than a pension scam
• Promising that the IUL will provide “tax-free retirement income” for “life.”

In recent cases brought by the attorneys at Rikard & Protopapas, Minnesota Life Insurance Company, Allianz Insurance Company, National Life, and their independent marketing organizations, faced hundreds of millions of dollars of claims related to the sales conduct surrounding IULs and an associated Ponzi scheme.

At some point, you may review your account statement and realize that the IUL you bought is not performing up to your expectations. You may not even know what happened or why your IUL is underperforming.

We investigate instances of IUL fraud and unsuitability against all companies and insurance agents such as:

• Pacific Life IUL
• Allianz
• Securian
• Minnesota Life
• National Life
• Lincoln Financial
• Nationwide IUL
• World Financial Group IUL

You may receive a shockingly large bill for a premium that you cannot afford, which was much larger than you were paying before. By that point, the agent and insurance company have been handsomely paid and have figuratively “fled town.” You are then left to pick up the pieces of your financial future.

We Can Help Figure Out What Happened and Take Action

This is the point where the lawyers at Rikard & Protopapas can help you. We can make sense of what happened if your policy lapses and figure out how the broker or insurance company violated any one of a number of securities laws or regulations, including:

• Not properly making a suitability determination (or not even making one at all)
• Failure to disclose all fees upfront
• Making untrue statements in connection with the sale of an IUL
• Failure to properly supervise sales representatives
• Failure to follow the company’s own policies and procedures.

Contact an Attorney to Start an Indexed Universal Life Insurance Lawsuit

If you believe that you have been misled or defrauded by your broker, you must take legal action to recoup your losses. It is not always an easy case when the broker has their own attorneys to fight you at every step of the way. We can help you determine the best way to seek repayment for what you lost.

Our attorneys have litigated hundreds of IUL cases across the country. We have recovered millions of dollars for victims of IUL policies gone wrong. Let us help you.

To speak with one of our experienced lawyers, you can send us a message online or call us today at (803)-805-7546. We work for you on a contingency basis, receiving a percentage of your financial recovery.