It is the single most powerful sales tool in the life insurance industry: the IUL illustration. It’s a ledger of numbers, sometimes running 50 pages or more, that projects your policy’s future value. It might show you becoming a millionaire, funding your entire retirement, and leaving a massive legacy, all tax-free.
But what happens when the illustration—the promise—doesn’t match reality?
What if your cash value is declining, even though you’re paying every premium? You are not alone. This disconnect is at the heart of a wave of IUL lawsuits and regulatory warnings. The hard truth is that an illustration is not a guarantee; it is a hypothetical sales projection.
The $8.5 million lawsuit filed by NASCAR champion Kyle Busch against Pacific Life is a high-profile example of how these complex illustrations can allegedly mask a financial disaster.
The Kyle Busch Case Study: A “Rosy” Illustration vs. a “Built to Fail” Reality
The lawsuit filed by RP Legal LLC details a perfect example of this illustration-versus-reality disconnect.
- The “Rosy” Projection: The as-issued illustrations for Kyle Busch’s main policy showed a “whopping $787k in annual income” starting at age 51 and an internal rate of return (IRR) of 6.09% . On paper, it looked like a powerful, high-performing retirement plan.
- The “Hidden” Flaw: But buried in those same numbers was a devastating flaw. The illustration showed the policy’s cash value declining after year 5. Why? Because the policy was structured with such massive internal fees (allegedly to maximize the agent’s commission) that the costs were projected to “overwhelm illustrated indexed interest credits” once the premiums stopped. It was, as an independent analyst called it, “built to fail”.
- The “Real World” Performance: The policy’s performance never came close to the 6.09% illustrated rate. Through February 2024, the average interest crediting rate was just 1.5%. This was because the funds were allocated to a Fixed Account earning only 2.25%, missing out on years of double-digit S&P 500 gains .
This case exposes the three core problems with IUL illustrations: they can be based on optimistic, non-guaranteed assumptions; they can obscure catastrophic fees; and they may have no bearing on how your policy is actually performing.
Why IUL Illustrations Are So Often Misleading
This isn’t an isolated problem. The issue of misleading IUL illustrations is so widespread that both financial regulators and state insurance commissioners have been forced to intervene.
A “Hypothetical” Future, Not a Guarantee
An illustration is a hypothetical projection based on “non-guaranteed” elements. These are the parts of the policy the insurance company can change at any time, including:
- Caps: The maximum rate you can earn (e.g., if the S&P 500 returns 20%, your “cap” may limit you to 9%).
- Participation Rates: The percentage of the index’s return you get to participate in.
- Cost of Insurance (COI): The internal cost for the death benefit, which typically rises every single year.
Sales illustrations are often run using the most favorable rate permitted by regulation. Insurers typically use the “disciplined current scale” (based on recent history) or the “currently payable scale,” and will project using whichever is more favorable. This results in a “best-case scenario” that may not be realistic.
The Problem is So Big, Regulators Stepped In
The National Association of Insurance Commissioners (NAIC), which sets standards for state regulators, saw this as a massive consumer protection issue. They created specific rules, known as Actuarial Guideline 49 (AG 49) and its successor, AG 49-A, to “bring uniformity” and stop illustrations from showing “unrealistic performance.”
This is a clear admission from the industry’s own regulators that IUL illustrations were a systemic problem.
Hiding Massive Fees in Plain Sight
Illustrations don’t have a line item that says, “Warning: 88% of your premium will be consumed by fees.” Instead, these massive costs are netted against the optimistic, non-guaranteed interest credits.
In the Busch case, the policy was allegedly loaded with nearly $6.6 million in fees during the five-year premium period alone, or approximately 88% of the $7.5 million paid in premiums. After premiums stopped in year 5, ongoing cost-of-insurance charges continued to erode the remaining cash value.
Not an Isolated Incident: A Nationwide Pattern
The Kyle Busch case may be the most famous, but it is not the first. RP Legal LLC is at the forefront of this fight and has seen a clear pattern of IUL misrepresentation nationwide.
The $1.5M Jury Verdict for IUL Misrepresentation
In a related case, RP Legal LLC secured a $1.5 million jury verdict against Pacific Life in Idaho (May 2024). That case involved a 69-year-old retiree who was sold a Pacific Life IUL policy marketed as ‘tax-free retirement income,’ but the funding mechanism turned out to be a fraudulent Ponzi scheme (Future Income Payments/FIP).
The lawsuit alleged Pacific Life ignored red flags during underwriting, approving the policy despite an unusually large death benefit ($3.3+ million) and a lack of affordability documentation. When the Ponzi scheme collapsed, Pacific Life refused to cancel or refund the policy. The jury found Pacific Life and its agent liable for negligence and misrepresentation, awarding full economic damages. This verdict shows that juries can and will hold companies accountable for these deceptive sales practices. (Note: Pacific Life has appealed this decision, which is currently pending.)
A Pattern of Investigation
RP Legal LLC is actively investigating claims against numerous carriers, including Allianz, Minnesota Life, and others, for similar issues. The complaints are often the same: complex illustrations, undisclosed fees, and policies that lapse, leaving retirees with nothing.
What You Can Do Right Now
If you own an IUL policy, you must investigate its true performance.
How to Read Your Own IUL Documents
Do not rely on your original sales illustration. Instead, you must:
- Request an “In-Force” Illustration: This is the most important step. An in-force illustration runs the projection based on your policy’s current cash value, the current cost of insurance, and the current cap rates. This will show you the policy’s real-world health.
- Look at the “Guaranteed” Column: Your illustration should show both a “guaranteed” and “non-guaranteed” scenario. The agent likely emphasized the non-guaranteed numbers. Look at the guaranteed column, which shows the worst-case performance—typically a 0% crediting rate on your indexed accounts—while still accounting for all policy charges. This column often shows the policy lapsing or cash value declining because the charges exceed any interest credits. This is the only performance the insurer actually promises.
Red Flags Your Policy Was Misrepresented
You may have a claim if you are experiencing any of the following:
- Your cash value is declining, even though you are paying premiums.
- You have received unexpected premium notices or lapse warnings.
- Your in-force illustration looks significantly worse than your original sales illustration.
- You were promised your policy would be “self-funding” but are being asked to pay more.
- You were told your policy was a “retirement plan” or “investment,” not life insurance.
RP Legal LLC Can Translate the Fine Print
You are not expected to be an expert in these complex financial products. That’s our job. As the attorneys for Kyle Busch and the legal team that won the $1.5 million verdict in Idaho, we understand precisely how these illustrations are used to hide the truth.
Get a Free, No-Cost Policy Review
RP Legal LLC is offering a free, confidential consultation to review your IUL policy and illustrations. We will analyze your documents for signs of misrepresentation and explain your options. Do not wait until your policy is empty. Call (803) 805-7546 or schedule your free case evaluation online today.