IUL Lawsuits in Hilton Head
Has a financial advisor or financial services firm recommended that you invest your money in an IUL, and it turned out not to provide the benefits or returns promised to you? You may have a legal claim for financial recovery and accountability from advisors or firms who recommended unsuitable IUL products to you due to their negligence or misconduct.
Contact RP Legal LLC for an initial case review with a knowledgeable Hilton Head IUL lawsuit attorney to discuss your options for seeking financial relief through a claim or IUL class action and learn how we can advocate for your rights and interests. Our legal team has over a century of combined experience helping hundreds of clients who have lost due to financial advisor negligence or misconduct, having become the country’s preeminent litigator of claims involving indexed universal life insurance policies. We have a 97 percent success rate that has allowed us to recover millions of dollars in compensation through settlements and verdicts for our clients.
What Are IULs?
Indexed universal life (IUL) insurance represents one form of universal life insurance. Universal life insurance policies include two elements: a cash value element and permanent insurance coverage (in the form of a death benefit).
Unlike other types of life insurance, universal life insurance policies can accumulate value. With an IUL, the cash value portion of the policy can earn interest by tracking a specific stock market index. Some IULs allow policyholders to split the cash value portion between index and fixed-rate accounts and determine the portions of their premiums that go to each account. The first portion of a premium paid on an IUL goes to the cost of insurance, another portion goes to administrative or management fees, and the remainder goes to the cash value portion of the policy.
IULs frequently offer an interest rate guarantee that purportedly protects a policyholder’s downside. However, insurers also impose rate caps in conjunction with rate floors, which can limit the returns a policyholder may see from an IUM. Furthermore, the expenses of IULs can also mitigate the benefits of rate floors.
IULs may allow policyholders to borrow money against the cash value. When policies hit a specific value, policyholders may also have the flexibility to reduce or skip their premiums temporarily. However, unpaid loans can reduce the death benefit paid after the insured’s death, and loans or skipped payments can reduce the policy’s value to the point that it lapses.
Common Areas of Misconduct
Financial firms and insurance companies may market IULs to individuals and families whose financial or investment goals do not align with the features, benefits, disadvantages, and risks of IULs. However, advisors may continue to push these products onto customers for various reasons, such as:
- Breaches of fiduciary duties, such as conflicts of interest or self-dealing (e.g., trying to sell as many products as possible regardless of suitability for clients)
- Advisor negligence in failing to assess whether an IUL fits a client’s needs or goals
- Firms’ failure to supervise representatives’ marketing activities
- Misrepresentation about the advantages, downsides, or risks of IULs
Some of the most common forms of misconduct that may lead to sales of unsuitable IULs to customers include:
- Recommending IULs to Older Clients – The potential tax implications of withdrawing funds that include investment gains before maturity may make IULs unsuitable for clients in or approaching retirement.
- Deceptive Marketing Practices – Firms may employ deceptive advertising that falsely represents or conceals aspects of IUL, such as presenting them as alternatives to traditional investment products or glossing over the downsides and risks of IULs.
- Concealing Excessive Fees – Sellers may gloss over the administrative or management fees charged on IULs, which can negate the downside protection of the base guaranteed interest rate.
- Misleading Illustrations That Overestimate or Exaggerate Returns – Marketing materials may exaggerate or provide unrealistic, best-case illustrations of the potential returns that IULs could gain, overinflating the potential value of the product.
- Multi-Level Marketing or Pyramid Sales Schemes – Sales practices for firms that specialize in IULs may veer into the territory of multi-level marketing and potentially unlawful pyramid schemes, where firms encourage customers to draw people in their networks into purchasing IULs.
Sellers of IULs use various marketing phrases or slogans to convince clients of the advantages of these financial products. However, many of the ways that financial advisors and insurance providers advertise IULs can mislead clients as to the benefits and potential upside of these products and conceal their potential risks and challenges. Some of the most common misleading phrases used by sellers include:
- “Tax-Free Retirement Income” – Statements like these try to sell clients on the idea that IULs can replace or supplement traditional retirement planning tools like Roth IRAs or pensions. However, sellers may gloss over the risks that IULs have, such as policy lapses due to unpaid premiums or loan defaults, financial troubles with the issuing insurance company, or rising costs of insurance that a policyholder can’t afford.
- “Be Your Own Bank” – Sellers may advertise the ability to take loans out against the cash value of an IUL, which policyholders could reinvest for further wealth-building. However, this line of marketing overlooks the fact that borrowing from a life insurance policy reduces the death benefit or increases the risk of a policy lapse if the policyholder doesn’t repay the loan. These statements also simplify banking concepts by ignoring the costs of borrowing.
- “No Downside Market Risk” – Advertising for IUL may emphasize the interest rate guaranty that many policies offer, while ignoring how interest rate caps and management fees can limit or negate a policyholder’s upside and make IULs seem safer than other types of investments.
- “Indexed Growth with No Loss” – Marketing for IULs can mislead potential customers into believing their money directly participates in the market, as the index account for an IUL merely tracks the performance of selected index funds. Promising “no loss” also overlooks the various costs of IULs, like fees, rate caps, or spreads.
- “Outperform Your 401(k)” – Sellers may tout IULs as superior to tax-qualified retirement plans like 401(k)s. However, they lack many of the benefits of retirement plans, such as employer matching contributions and gains tied to historical market performance. Such marketing may also falsely suggest that IULs have more advantageous tax treatment or less volatility in performance.
- “Tax Shelter for High-Income Earners” – Advisors or insurance companies may target high-net-worth customers with marketing that suggests IULs can provide a tax loophole. However, state and federal tax authorities typically scrutinize legal structures or financial products that purport to avoid taxes.
- “Life Insurance with Living Benefits” – Marketing slogans for IULs may frame these products as serving the dual purposes of offering life insurance with the ability to generate income through investment, but rarely explain that the investment benefits of IULs face significant restrictions.
Financial Firms & Life Insurance Companies Engaged in IULs
Various life insurance companies and financial firms have built substantial businesses focused on selling IULs. Some of the largest insurance providers of IULs include:
- Pacific Life (Frequently works with high-net-worth and premium clients)
- Allianz (Top IUL seller frequently used for “tax-free retirement income” pitches)
- National Life Group (Primary IUL partner for several financial firms)
- Minnesota Life (Securian)
- Fidelity and Guaranty
- Lincoln Financial
- Transamerica
- Mutual of Omaha
Many insurance companies work with financial firms to pitch IULs to their clients or prospective clients. Examples of firms that have large businesses involved in selling IULs include:
- World Financial Group
- PHP Agency
- Family First Life
- Symmetry Financial Group
- Integrity Marketing Group
- LifePro Financial Services
- Equis Financial
- Five Rings Financial
IULs in Hilton Head, SC
Residents of Hilton Head who have invested in unsuitable IULs based on the negligent or misleading advice of financial firms or insurance companies may have legal claims they can pursue against liable parties to recover compensation for their losses. Individuals and families in Hilton Head may file suit in South Carolina state court in the Beaufort County Courthouse, or federal court in the U.S. District Court in Charleston.
How an IUL Lawsuit Lawyer Can Help
After you’ve discovered the unsuitability of an IUL product you purchased based on a financial advisor’s or insurance provider’s recommendation, you may want to pursue legal action to seek financial recovery for your losses and accountability for the advisor’s or firm’s negligence or misconduct. An attorney from RP Legal LLC can help you pursue financial recovery in an indexed universal life lawsuit by:
- Sitting down with you to discuss the details of your case to investigate a firm’s or advisor’s negligence or misconduct
- Documenting the financial losses you’ve sustained due to an unsuitable IUL that an advisor improperly recommended to you
- Building a legal case and working with experts as necessary
- Vigorously pursuing maximum compensation for you, whether through a negotiated settlement or by filing suit to hold liable parties accountable in court
Contact RP Legal LLC Today to Discuss Your Legal Options
When you’ve put your wealth into an IUL only to find that it does not provide the returns or benefits the financial advisor promised you, you may have a legal claim to recover compensation and accountability. Call RP Legal LLC today at (803) 805-7546 for a confidential consultation with an IUL lawsuit attorney in Hilton Head to learn more about your rights when you’ve purchased an IUL based on negligent or misleading recommendations from your investment broker or financial advisor.