Did you purchase an IUL insurance policy based on the advice or sales efforts of a financial advisor or a sales representative? You may have discovered aspects of IULs that an advisor or sales representative failed to disclose, or risks of these products that do not align with your financial objectives or needs. When you have sustained losses in an unsuitable IUL insurance policy, you deserve to pursue legal action to hold your advisor or sales representative accountable for their negligence or misconduct.
Contact RP Legal LLC today for an initial case review with an experienced Charleston IUL attorney to discuss your rights to seek financial recovery and accountability from an advisor or firm through a legal claim or IUL class action, and learn how we will advocate for your rights and interests. Our lawyers have over a century of combined legal experience protecting victims of IUL scams. We have a proven record of success in hundreds of cases, with a 97 percent success rate and millions of dollars recovered for our clients through settlements and verdicts.
Understanding IULs
Like other universal life insurance products, indexed universal life (IUL) policies have two components: permanent insurance, which provides a death benefit upon the insured person’s passing, and a cash value account. The cash value component of an IUL policy grows in value by earning interest tracking a stock market index chosen by the insurer that issued the policy. Some IULs split their cash value components into an index-tracking account and a fixed-rate account. Most policies include an interest rate guarantee that claims to protect policyholders from downside risk if the tracked index fails to rise. However, interest rate guarantees also typically come with rate caps that limit a policyholder’s upside.
A policyholder’s premium covers the cost of the insurance and the fees and expenses charged by the insurance company to manage the policy, with the remainder allocated to the cash value component. Policyholders usually can designate how much of this remainder goes to the index and fixed-rate accounts.
As the value of an IUL policy grows, policyholders may have the option to reduce or skip their premium payments temporarily. Policyholders may also have the right to take a loan against the cash value of their policy. However, stopping payments for too long or failing to repay loans can reduce the benefit or cause the policy to lapse if the value falls below a specific threshold.
Advisor/Firm Misconduct Involving IUL Sales
Many IUL sales in Charleston occur due to misconduct by financial advisors or sales representatives who push these products, regardless of their suitability for a client’s financial goals or needs. Some of the most common types of misconduct by advisory firms or insurance companies that sell IULs include:
- Breaches of fiduciary duties by financial advisors, such as conflicts of interest or self-dealing
- Negligence in evaluating the suitability of an IUL for a client’s financial needs or objectives
- Failures by firms to supervise their registered representatives
- Misrepresentation or omission of the benefits, disadvantages, risks, or likely returns of IULs
Examples of specific acts of misconduct that may occur during the marketing of IULs to retail customers include:
- Recommending IULs to Older Customers – IULs may not suit the financial needs or objectives of older customers in or approaching retirement, as withdrawal of funds from IUL policies under certain circumstances can trigger tax liabilities.
- Deceptive Marketing Practices – Sellers may tout IULs as a superior alternative to traditional investment plans by concealing some of the downsides and risks of IUL policies, such as borrowing costs or fees that can negate some of the protective features of IULs.
- Misleading Illustrations That Overestimate IUL Returns – Marketing materials may exaggerate normal returns of IUL products or portray best-case scenarios as likely returns.
- Multi-Level Marketing Sales Practices – Some firms sell IUL products through multi-level marketing strategies.
- Fraudulent Practices – Some marketing efforts for IULs can cross over into fraudulent territory, such as pyramid-like schemes.
Firms that have a significant portion of their business focused on selling IULs may use misleading marketing phrasing or slogans designed to make IULs seem more advantageous than other financial products and downplay their challenges or disadvantages. Common misleading phrases used by IUL sellers include:
- “Tax-Free Retirement Income” – Sellers may portray IULs as offering retirement income streams equivalent to those of other tax-advantaged plans, such as pensions or Roth IRAs. However, these pitches overlook the risks associated with IULs, such as defaults on loans taken out against the cash value, lapses in policy coverage, or rising insurance costs.
- “Be Your Own Bank” – Marketing for IULs may promote the ability of policyholders to borrow against the cash value and use those funds for other wealth-building ventures. However, sellers may overlook the fact that borrowing against an IUL policy can reduce the death benefit or risk causing the policy to lapse. They may also fail to disclose the costs associated with borrowing.
- “No Downside Market Risk” – Advertising often emphasizes an IUL’s interest rate guarantee to claim that policyholders have no downside market risk. However, these claims overlook the fact that rate caps or police fees can limit upside or mitigate the protection offered by interest rate guarantees. As a result, sellers may attempt to make IULs appear safer investments than traditional financial products, even though they can incur hidden losses through policy expenses.
- “Indexed Growth with No Loss” – Marketing materials for IULs may confuse prospective customers into believing these products offer direct market participation when, in fact, they do not.
- “Outperform Your 401(k)” – Sellers may market IULs as a better investment strategy than traditional tax-qualified retirement plans. However, these advertising strategies ignore critical benefits of conventional retirement plans, such as employer matching or the ability to invest in the market and get direct returns.
- “Tax Shelter for High-Income Earners” – Some firms market IULs to high-net-worth customers by pitching them as a tax loophole. However, IULs structured to avoid taxes can attract scrutiny by the IRS or state regulators. Furthermore, focusing on purported tax benefits overlooks the interest rate risks of IULs.
- “Life Insurance with Living Benefits” – Marketing may frame an IUL policy as having a dual purpose of providing life insurance and offering an investment vehicle, but may not disclose the fact that policies may have strict underwriting requirements or expensive riders.
Insurance and Financial Services Firms Involved in IULs
Certain insurance companies and financial advisory firms aggressively market IULs to customers, even to those whose financial objectives or needs do not align with the features of an IUL. Some of the insurers that have big IUL businesses include:
Insurance Companies
- Allianz
- Columbus Life
- Family First Life
- 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
IULs in Charleston
Charleston residents who fall victim to an IUL scam may have a legal claim against a financial advisor, financial services firm, or insurance company that wrongfully induced an individual or family to put their money into an unsuitable IUL. Individuals may pursue their claims in South Carolina state court in the 9th Judicial Circuit in the Charleston County Courthouse or federal court in the U.S. District Courthouse and Judicial Center in Charleston.
How Can an IUL Lawsuit Attorney Help?
If you’ve sustained financial losses from an IUL policy after a Charleston advisor or sales representative pressured or tricked you into buying a policy, you may have a legal claim that can provide you with financial compensation and justice for their negligence or misconduct. However, pursuing claims against financial institutions can involve complex factual and legal issues. An IUL lawsuit lawyer from RP Legal LLC can help you pursue the relief you deserve by handling all the details of your claims. Our firm will fight for the results you need by:
- Sitting down with you to listen to your story and learn about the circumstances surrounding your purchase of an IUL
- Investigating your case to obtain evidence of an advisor’s or representative’s negligence or misconduct
- Determining what losses you’ve sustained due to an IUL policy that did not align with your financial needs or goals
- Identifying parties you might hold liable, such as financial advisors or insurance providers
- Vigorously pursuing your claims at the negotiating table or in court to get you a settlement or judgment
Contact Our Firm Today for Guidance
After losing money in an IUL policy when an advisor or seller misled you about the policy’s features or concealed downsides or risks, you may have the right to seek financial recovery in an indexed universal life lawsuit. Call RP Legal LLC at [phone number linked=true] today for a confidential consultation with a Charleston IUL lawsuit attorney. We’ll explain how our firm can help you pursue your legal claims against a financial advisor or insurance company for negligently or wrongfully advising you to purchase an unsuitable policy.