Have you purchased an IUL insurance policy in Mount Pleasant based on the advice or sales pitch of a financial advisor or insurance company sales representative? After putting your wealth into an IUL policy, you may have discovered that these products have downsides and risks that the advisor or seller failed to disclose or that the policy has failed to provide promised returns. As a result, you may have a legal claim against a financial advisor or insurance company for losses you sustained in an unsuitable IUL.
Contact RP Legal LLC today for an initial case evaluation with an experienced attorney to discuss the possibility of filing an indexed universal life insurance lawsuit against a financial advisor or insurance representative who negligently or wrongfully recommended an unsuitable product that caused you to sustain losses. Our Mount Pleasant IUL lawsuit attorneys have over a century of combined experience advocating for clients. We have a proven track record of success in hundreds of cases, with a 97 percent success rate and millions of dollars in compensation recovered through settlements and verdicts for our clients.
Understanding IULs
Like other types of universal life insurance policies, indexed universal life insurance (IUL) has two components: a cash value component and permanent insurance that provides a death benefit upon the death of the insured person. With IUL policies, the cash value component earns interest by tracking one or more stock market indexes selected by the insurer that issues the policy. However, the cash value component can have both index-tracking and fixed-rate accounts, with policyholders able to determine how much of their premiums go into each account.
Most IUL policies offer an interest rate guarantee for the index account in the cash components, which purportedly mitigates a policyholder’s downside. However, policies with interest rate guarantees also typically have rate caps that limit the amount of interest a policyholder can earn. Furthermore, the fees charged on an IUL policy can mitigate the protective effect of the interest rate guarantee.
A premium for an IUL policy first pays for the insurance component, then pays fees and expenses charged by the insurance company to manage the policy, with the remainder of the premium contributed to the cash value component. As the value of an IUL policy increases, policyholders may gain the option to reduce or skip their premium payments. Policyholders can also borrow money against the cash value component. However, skipping too many payments or failing to repay loans taken out against the policy can reduce the death benefit or cause the policy to lapse.
Signs of Misconduct Involving IUL Sales
Improper activity by Mount Pleasant financial advisors or insurance providers when selling IULs may result in sales to customers who do not need these products or would not buy them with appropriate disclosures and advice. 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, including working under a conflict of interest or engaging in self-dealing
- Negligence in evaluating the suitability of an IUL for a client’s specific needs or objectives
- Advisory firms’ or insurance companies’ failure to supervise their registered representatives
- Misrepresentations of the benefits, disadvantages, risks, and 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, as older customers typically need products that provide income streams; IULs may not suit older customers’ needs, as early withdrawals of funds through loans may trigger unexpected tax liabilities.
- Deceptive marketing practices, such as positioning IULs as an alternative or superior investment plan compared to traditional retirement products.
- Misleading illustrations that overestimate IUL returns.
- Multi-level marketing sales practices that recruit customers to draw in more potential clients from their personal and professional networks.
- Fraudulent practices, such as running IUL sales businesses as pyramid 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 market IULs as an alternative to traditional tax-free retirement plans, such as pensions or Roth IRAs. However, marketing materials may fail to disclose the risks of IULs that traditional retirement plans don’t have, such as the risk of policy lapses, the collapse of the issuing insurance company, or rising insurance costs that may make future premiums unaffordable.
- “Be Your Own Bank” – Advertising for IULs may focus on policyholders’ ability to borrow against the cash value, which they can use for other investment purposes. However, marketing may overlook the fact that borrowing against an IUL policy can reduce the death benefit or risk collapsing the policy if the policyholder fails to repay the loans, and simplify banking concepts by not disclosing the costs of borrowing money from an IUL.
- “No Downside Market Risk” – Marketing may emphasize an IUL’s interest rate guarantee without explaining corresponding rate caps or policy fees that can mitigate or negate the benefit of a rate floor. Sellers may attempt to make IULs appear safer than traditional investments by failing to disclose how expenses or fees can result in losses for policyholders.
- “Indexed Growth with No Loss” – Marketing materials may falsely imply that money in the cash value component of an IUL directly participates in the market, as index accounts merely track the performance of market index funds without purchasing securities.
- “Outperform Your 401(k)” – Sellers may tout IULs as superior to traditional tax-qualified retirement plans, but those plans offer benefits that IULs do not, such as the option for employer matching contributions and direct market participation. Advertising may falsely suggest that IULs enjoy better tax treatment or have less volatility than traditional investments.
- “Tax Shelter for High-Income Earners” – Sellers targeting high-income clients for IULs may attempt to pitch the product as a means of tax avoidance. However, financial products that purport to offer a loophole for avoiding taxes frequently come under regulatory scrutiny.
- “Life Insurance with Living Benefits” – Advertising for IULs may characterize these products as a dual-purpose financial instrument that offers life insurance combined with an investment opportunity. However, sellers may not disclose that the economic benefits of IULs can depend on underwriting requirements or the inclusion of expensive riders.
Insurance and Financial 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 Mount Pleasant
People in Mount Pleasant who had advisors mislead them into purchasing unsuitable IUL products due to misleading marketing and negligent advice may have claims against their financial advisors and insurance providers to recover compensation for their losses from an IUL. Mount Pleasant residents may pursue their claims in court by filing an action in the South Carolina state court in Charleston County or the federal court in Charleston.
How Can an IUL Lawsuit Attorney Help?
Pursuing a legal claim or an IUL class action can involve complex factual and legal issues. As a result, having experienced legal representation can help you advocate for your rights and interests in an indexed universal life lawsuit. If you were the victim of an IUL scam, an attorney from RP Legal LLC can seek the financial recovery and accountability you deserve by:
- Taking time to listen to your story and understand the circumstances of the marketing and sale of an IUL to you by a financial advisor or insurance company
- Thoroughly investigating your claims to recover evidence of an advisor’s or firm’s negligence or misconduct
- Working with financial experts to determine your losses from an unsuitable IUL to ensure we pursue the financial recovery you need and deserve
- Identifying potentially liable parties you might recover compensation from, such as financial advisors, advisory services firms, sales representatives, or insurance companies
- Pursuing the financial relief and accountability you deserve from an advisor or firm whose negligence or misconduct caused you to put your wealth into an unsuitable IUL product that subsequently caused you to sustain financial losses, including by vigorously negotiating a fair and favorable settlement or taking your case to court, if necessary
Contact Our Firm Today for Guidance
When you sustain financial losses in an IUL that an advisor improperly recommended to you, call RP Legal LLC today at (803) 805-7546 for a confidential consultation with an experienced IUL lawsuit attorney in Mount Pleasant. We’ll discuss your options for seeking compensation and justice from a financial advisor or insurance company that negligently or wrongfully sold you an unsuitable IUL policy that caused you to lose money.