Indexed Universal Life vs. Whole Life Insurance

15 March, 2024

Indexed universal life (IUL) insurance sales are experiencing strong growth in the United States, with double digits increases for five consecutive quarters. The rise in sales has little to do with an IUL being a sound investment. It has everything to do with how much money everyone else makes, all at your expense.

You may have been better off with a different type of whole insurance policy, only to pay higher fees when you have been steered into an IUL. If you have lost money on an IUL that someone else had no business selling you, a lawsuit or claim may be a legal option. Call the unsuitable investment attorneys at Rikard & Protopapas to discuss your case.

The Differences Between an IUL and Whole Life Insurance

Whole life insurance

Whole life insurance is a form of a permanent policy that provides coverage for the rest of your life. You do not need to keep purchasing a new policy when your last one expires. In exchange for the certainty of coverage, you would pay higher premiums. You may even receive a dividend from your whole life insurance policy based on investment performance.

Indexed universal life insurance

IULs are indexed to a certain measure, such as the Standard & Poor’s 500 Index. You have some upside, based on the performance of the index, but the amount you can earn will be capped.

IULs can be based on many features. They can have different caps and floors. All in all, IULs can be very difficult to understand, and you may not get full answers and explanations from the insurance company or the marketer.

One of the major differences between an IUL and a whole life policy is the amount of fees that you would pay upfront. Fees will eat up most of your initial premium payments, as the seller gets a large commission, and the insurance company needs to be paid. The company is always going to be paid first, and you are the one writing the check.

Like any type of financial product, companies will try to “innovate” to offer what they claim are increased benefits and flexibility for customers. In reality, the company is also enhancing its own profits at the same time because they will be raking in more fees.

IULs Can Magnify Many of the Drawbacks of Permanent Life Insurance

Whole life policies may have their own complexities, but IULs take things to an entirely different level.

There is an entirely new set of terminology that you have to learn, and you cannot completely trust the insurance company to explain things to you. If you ask about the fees, you may be told a story that justifies why the insurance company needs to charge so much.

Whole life insurance policies already have their own issues that may make them the wrong product for many customers. These policies have high premiums, and they may have a reduced death benefit. Whole life policies can also be much more complex than purchasing a term life insurance policy.

IULs are even more disadvantageous than a whole life policy because many of the drawbacks are magnified. Many customers do not even understand all the terms and features of an IUL. They just see the glossy brochures and the graphs that make these policies seem like a sound way of both protecting the family and investing.

They may see an entire dictionary of jargon and acronyms without ever really understanding what they own. The fees can be even steeper because the insurance company claims that an IUL is expensive to administer and oversee.

One of the most significant cons to purchasing an IUL (as opposed to whole life) is that the premiums will increase over time. Market performance (or lack thereof) could leave you owing even more money each year. As you get older, and may need to be saving more, you will be hit with a higher annual bill.

Then, you may be in danger of having to surrender the policy and take a very large financial hit. When you actually surrender the policy, you could be left with even less that you would have received if you surrendered a whole life policy because there are very high upfront charges. You could even end up with next to nothing after years of paying high premiums, leaving you shocked and in the red.

You May Be Pushed to Purchase an IUL When it Makes No Sense

Marketers and insurance companies will often push you to purchase an IUL because they are paid very high fees. There may have been a product that was far more suitable that would have cost you less in fees, but the marketer would have gotten paid much less.

However, they do not care about your financial interests and what makes sense for you. You may be able to file a lawsuit when you were misled about the potential returns and the fees or when you were pushed into an IUL that made little to no sense for you.

An experienced attorney can review your case and help determine whether you can take legal action.

Contact an IUL Lawsuit Attorney Today

The attorneys at Rikard & Protopapas can help you when you have been defrauded in any type of investment transaction. We take action against insurance companies and brokers who have placed their own interests ahead of yours and have made illegal profits at your expense.

You can speak with a lawyer today about your case, and we can help you plot your path forward. To schedule a free initial consultation, you can send us a message online or call us today at (803)-805-7546. You owe us nothing unless you win your case.

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