Premium financing represents a sophisticated financial strategy where high-net-worth individuals borrow money to pay premiums on indexed universal life (IUL) insurance policies. The policy’s cash value serves as collateral for the loan, creating a leveraged arrangement designed to maximize death benefits while minimizing out-of-pocket premium payments. This strategy has become increasingly popular among business owners and affluent individuals seeking estate planning solutions and tax-advantaged wealth transfer.
In a typical premium financing arrangement, a lender provides capital to cover policy premiums. The policy owner maintains the insurance contract while the lender holds a security interest in the cash value. The strategy appeals to business owners and affluent individuals seeking estate planning solutions, tax-advantaged wealth transfer, and liquidity management. However, this structure creates significant risks when market conditions change or policy performance underperforms projections.
The mechanics involve three parties: the policy owner, the insurance company, and the premium finance lender. The lender typically requires the policy to maintain a minimum cash value relative to the outstanding loan balance. When cash values decline or interest rates rise, the arrangement becomes unstable, triggering collateral call requirements that can force policyholders into financial distress. Learn more about how premium financing works and the risks involved.
How RP Legal LLC Helps Premium Financed IUL Policyholders
RP Legal LLC evaluates premium-financed IUL claims through comprehensive investigation and analysis. Our process begins with free consultation to understand your situation, policy history, and financial impact. We represent clients throughout the IUL lawsuit process, from initial evaluation through trial.
We obtain complete policy documentation and analyze illustrations provided at sale. We compare projected performance to actual results, identifying misrepresentations and unsuitable recommendations. We investigate agent credentials, licensing history, and prior complaints to establish patterns of misconduct.
We analyze suitability through expert review of your financial situation, risk tolerance, and investment objectives at the time of sale. We determine whether premium financing aligned with your circumstances or represented an unsuitable recommendation driven by agent compensation.
We pursue litigation on a contingency basis, meaning you pay no upfront costs. We recover attorney fees and costs from settlement or verdict proceeds. Our experience with IUL litigation positions us to evaluate claims accurately and pursue maximum recovery.
RP Legal LLC represents clients throughout litigation, from initial claim evaluation through trial if necessary. We handle all communications with insurers, agents, and their counsel. We prepare cases for trial, including expert witness coordination and evidence presentation. Learn more about premium financed IUL lawsuits and how we can help.
How Premium Financing Fails: The Collateral Call Problem
Premium financing strategies depend on consistent policy performance and stable interest rate environments. When either condition changes, policyholders face devastating consequences. The 2023-2025 interest rate environment exposed fundamental weaknesses in premium-financed IUL arrangements sold during the low-rate period.
Collateral calls occur when the policy’s cash value falls below the lender’s required threshold. This happens through two mechanisms: declining index performance reducing cash value accumulation, or rising interest rates increasing the cost of servicing the premium finance debt. When collateral calls occur, policyholders must inject additional capital to maintain the arrangement or face policy lapse. Understanding collateral call mechanics helps clients recognize when they’re in danger.
The Stevenson family case illustrates this problem. Todd Stevenson and family members purchased $67.5 million in premium-financed life insurance policies in 2013 and 2017. By 2023, after interest rates surged, the premium debt service exceeded policy value by approximately $8 million. The family faced a choice: inject millions in additional capital or allow policies to lapse, triggering tax consequences and loss of death benefits. This case remains pending in federal court as of October 2025.
Policy illustrations provided at sale typically show optimistic index performance assumptions. These projections often fail to materialize, particularly during market downturns or periods of index volatility. When actual performance lags projections, cash value accumulation slows, and collateral requirements become impossible to meet. Policyholders discover they cannot afford to maintain arrangements they were told would require minimal ongoing investment. This represents a form of misrepresentation that creates legal liability.
Common Misrepresentations in Premium Financed IUL Sales
Insurance agents and financial advisors frequently misrepresent premium-financed IUL policies to justify sales to clients. These misrepresentations take several forms, each creating liability for unsuitable recommendations. Understanding these deceptive practices helps clients recognize when they’ve been victims of deceptive marketing practices.
Agents characterize premium financing as “free insurance,” suggesting clients receive substantial death benefits without meaningful premium payments. This misrepresents the arrangement’s true cost structure and ignores the collateral call risk. When collateral calls occur, clients discover the insurance was never free—they face substantial additional capital requirements.
Agents present premium-financed IUL policies as retirement income vehicles, claiming clients can access cash values for retirement spending. This misrepresents policy mechanics and ignores the lender’s security interest in cash values. Policyholders cannot access collateralized cash values without lender consent, making these policies unsuitable for retirement income planning. Many clients have been sold IUL policies as retirement solutions without proper suitability analysis.
Agents understate interest rate risk, suggesting premium financing arrangements remain stable regardless of rate environment changes. This misrepresentation ignores the fundamental mechanics of premium financing, where rising rates increase debt service costs and trigger collateral calls. Agents fail to explain how rate increases directly threaten policy viability.
Agents overstate index performance projections, using best-case scenarios rather than conservative assumptions. Policy illustrations show hypothetical returns that rarely materialize, creating false expectations about cash value accumulation. When actual performance lags projections, policyholders face collateral calls they never anticipated. Understanding IUL fees and costs helps clients recognize when they’re being misled.
Agents conduct inadequate suitability analysis, failing to assess whether premium financing aligns with client financial situations, risk tolerance, and investment objectives. Suitable recommendations require thorough investigation of client circumstances, not merely presenting premium financing as an attractive strategy for high-net-worth individuals. This failure constitutes broker negligence that creates legal liability.
Who Is Liable in Premium Financed IUL Lawsuits?
Multiple parties bear liability in premium-financed IUL litigation. Insurance companies face liability for issuing policies with inadequate underwriting, failing to conduct proper suitability analysis, and providing misleading policy illustrations. Insurance agents and financial advisors face liability for misrepresenting policies, failing to explain risks, and recommending unsuitable products.
Premium finance lenders face liability for failing to conduct adequate due diligence on policy viability and for aggressive collateral call practices. Intermediaries and financial advisors who structured the arrangements face liability for negligent advice and breach of fiduciary duty.
Courts establish liability through multiple legal theories. Negligence claims allege agents and insurers failed to exercise reasonable care in recommending and issuing policies. Fraud claims allege intentional misrepresentation of material facts regarding policy performance, interest rate risk, and collateral call mechanics. Breach of fiduciary duty claims apply in limited circumstances where agents held client funds, maintained special relationships, or provided specific financial advice beyond insurance placement.
Courts hold insurance professionals accountable for unsuitable recommendations regardless of client sophistication. This ruling signals that high-net-worth status does not excuse agents from conducting proper suitability analysis or explaining complex product risks. Broker negligence claims establish accountability for inadequate due diligence.
Unjust enrichment claims allege defendants profited from unsuitable recommendations while clients suffered losses. These claims succeed when clients prove they would not have purchased policies but for misrepresentations, and defendants received compensation they should not have retained.
Recoverable Damages in Premium Financed IUL Cases
Policyholders recover multiple categories of damages in successful premium-financed IUL litigation. Out-of-pocket premium payments represent the most straightforward recovery category. Clients recover all premiums paid into policies that failed to perform as represented.
Collateral call amounts represent additional recoverable damages. When policyholders inject capital to meet collateral requirements triggered by policy underperformance, they recover those amounts as damages caused by unsuitable recommendations.
Lost investment returns represent damages for opportunities foregone. Clients recover the difference between returns they would have earned investing capital in suitable alternatives versus returns actually earned on premium-financed policies.
Policy surrender losses represent damages when policyholders terminate policies to stop collateral call demands. Surrender charges, tax consequences, and lost death benefits constitute recoverable damages.
Punitive damages apply in fraud cases where defendants acted with intentional disregard for client interests. Punitive damages punish egregious conduct and deter similar misconduct by other insurance professionals.
Recent verdicts demonstrate substantial recovery potential. The Shelstad v. Pacific Life case resulted in a $1.5 million jury verdict in May 2024. This verdict established that insurance companies and agents face significant liability for unsuitable premium-financed IUL recommendations. Additional cases remain pending, with damages sought ranging from $1.3 million to over $1 million in various jurisdictions. View case results from similar litigation.
Financial and Insurance Firms We Target
Insurance Companies
- Allianz
- Columbus Life
- Family First Life
- MetLife
- Minnesota Life/Securian Financial
- National Life Group
- Pacific Life
- Protective
- Prudential
- Transamerica
Financial Firms
- Ameritas
- Equis Financial
- Equitable AXA
- Five Rings Financial
- Global Atlantic (Accordia)
- Integrity Marketing Group
- John Hancock
- LifePro Financial
- Mutual of Omaha
- North American
- Penn Mutual
- PHP Agency
- Symetra
- Symmetry Financial Group
- World Financial Group
IUL Lawsuits Nationwide
At RP Legal LLC, we handle IUL cases nationwide, bringing empathy and expertise to every client. No matter where you are, we’re here to help.
Frequently Asked Questions
What is the difference between premium financing and regular IUL policies?
Regular IUL policies require policyholders to pay premiums directly from personal funds. Premium-financed IUL policies involve borrowing money to pay premiums, with the policy’s cash value serving as collateral. Premium financing creates additional risk through collateral call requirements when cash values decline.
When do collateral calls typically occur?
Collateral calls occur when policy cash value falls below the lender’s required threshold. This happens through declining index performance or rising interest rates increasing debt service costs. The 2023-2025 interest rate environment triggered widespread collateral calls on policies sold during the low-rate period.
Can I recover money if my premium-financed IUL failed?
Yes. If you received unsuitable recommendations, misrepresentations about policy performance, or inadequate suitability analysis, you may recover out-of-pocket premiums, collateral call amounts, lost investment returns, and policy surrender losses. Contact RP Legal LLC for free evaluation of your claim.
What is the statute of limitations for filing an IUL lawsuit?
Statute of limitations varies by state and claim type. In South Carolina, claims must be filed within three years from discovery of the unsuitable recommendation. In Montana, fraud claims must be filed within two years. Contact RP Legal LLC immediately to protect your rights and ensure compliance with applicable deadlines.
Do I need to prove the agent acted intentionally to win my case?
No. Negligence claims require only proving the agent failed to exercise reasonable care. Fraud claims require proving intentional misrepresentation. Breach of fiduciary duty claims apply in limited circumstances where agents held client funds or maintained special relationships. RP Legal LLC evaluates which claims apply to your situation.
How long do premium financed IUL lawsuits typically take?
Timeline varies based on case complexity and defendant responsiveness. Some cases settle within 12-18 months. Others proceed to trial, requiring 2-3 years or longer. RP Legal LLC manages your case efficiently while pursuing maximum recovery.
Contact RP Legal LLC Today
Contact RP Legal LLC for free consultation regarding your premium-financed IUL policy. We represent clients on contingency basis with no upfront costs. Call (803) 805-7546 or schedule a consultation online to discuss your situation with an attorney experienced in IUL litigation.