Why Is Indexed Universal Life Insurance a Bad Investment?

15 March, 2024

No matter what you may read or are told, an indexed universal life (IUL) insurance policy is not a good investment. Too many people make too much money on selling IUL policies for it really to be good for you.

Seemingly, everyone has a hand in your pocket, and you will never even know it. You may only learn the hard way when your IUL policy drastically underperforms your expectations or when you need to get out of your policy.

The unsuitable investment fraud attorneys at Rikard & Protopapas can help you take action against IUL companies and marketers when they misrepresent their product to you and cost you money.

An Indexed Universal Life Policy Is Never a Sound Investment

The problem for customers is that marketers try to sell IUL insurance as both a life insurance policy and a sound investment that can help you build wealth. Customers are led to believe that their life insurance policy will create generational wealth, so they are more willing to pay much higher premiums for their coverage.

The problem with indexed universal life is that the customer may see less benefit from the steep premiums, while the insurance company and the representative who sold you the policy will do very well financially.

The IUL company has likely provided you with very rosy assumptions that are a prominent part of their glossy brochures they give you when you are considering buying the product. An IUL is never as good as you are led to believe, and you are better off putting your money elsewhere.

IUL Problem #1: The IUL Company Tacks on Steep Fees to Your Premiums

You may never quite know what all the components of your premiums are because the insurance company never told you. They may have shown you glossy brochures that have charts and figures that show how well you are doing (without regard to the opportunity costs of putting your money into a policy that caps your returns).

The truth is that there are all sorts of additions to your premiums that hike your bill every year. These fees have nothing to do with building wealth, unless you are talking about the wealth of the IUL company and the marketer.

IUL Problem #2: You Pay a High Amount in IUL Premiums

There are several reasons why IUL premiums are so high, including:

  • The insurance company tells you that IUL policies are more expensive to oversee and manage, even though they have sung the policy’s praises during the sales process.
  • The policies are designed to be opaque and complex, allowing the IUL company to assess all sorts of claimed fees and expenses, and you never quite understand the reason.
  • The policies are written to charge you much higher premiums as you get older.

Your premiums go up, making your policy harder to afford

The fact that the premiums escalate over the years make it harder for you to maintain an IUL policy. You may have been told that you can always afford your premiums, but that assurance may factor in the assumption that you will always keep your job.

The fact is that you are paying more, as your financial situation may be changing for the worse. For example, you may no longer be able to work because you are dealing with a chronic illness. You are forced to pay the premiums that you can no longer afford at a time when you may need your policy benefits the most.

IUL Problem #3: It Is Hard to Get Out of an IUL

Once you purchase an IUL, it will be difficult to get out of the product.

Of course, you are not obligated to keep paying premiums for the rest of your life, but you would take a huge financial hit if you surrendered your policy. The insurance company will assess you with steep charges, and you may end up with a fraction of the money that you put into your policy.

You can always stop paying your premiums, but the IUL company would keep almost all the money you were relying on to build your wealth like they told you.

You also never get back what you think when you cash in or surrender an IUL.

First, the IUL company has built in a large surrender charge that penalizes you when you try to get out of your policy. In many cases, the surrender charge is entirely arbitrary and does not reflect any type of reality for how much it may actually cost to close your policy.

Second, the IUL company may want to lock you into paying outsize and escalating payments over the years. They want you to be afraid of the consequences of no longer paying your rising annual bills. The IUL company may cut you a break on surrender charges, but only after you pay them for an enhanced cash value rider.

The truth is that the value of your IUL will be depressed in the early years of your policy. The steep initial fees that you paid at the outset of the policy will be reflected in a much lower cash value of the policy. You may only begin to catch up years into the policy when you are then facing a steep surrender fee.

There is really no easy way to get out of an IUL without taking a total financial bath. By that time, the IUL company, which has no obligation to act in your interests in the first place, has already been handsomely paid.

Chances are that you should have never purchased the IUL in the first place, but it is too late now to do anything about what you bought. The only option that you have at this point is to take legal action when you have been the victim of wrongdoing.

Reasons Why You Can Sue a Company Selling IULs

If you believe that you have taken unreasonable losses from your IUL policy, you may have a legal cause of action against the IUL company.

There are numerous grounds for your lawsuit, including:

  • The IUL company did not fully disclose the risks and material facts of the policy before they sold it to you.
  • You have been charged unreasonably high fees for your insurance policy.
  • The IUL policy was not a suitable investment for you based on your own investment objections.
  • The IUL company, or the representative who sold you the policy, made misstatements when making the sale.

There are scores of horror stories each year about customers who end up with nothing when they try to cash out of an IUL or have no idea about the financial consequences of their decisions. They may be unable to pay the steep premiums and then are forced to lose all the money that they put into what they were led to believe was a stable investment product because the company has already been paid handsome fees.

Contact an Indexed Universal Life Insurance Fraud Attorney Today

If you have been taken by surprise by your financial losses, contact an experienced investment fraud attorney at Rikard & Protopapas to learn whether you can take legal action against the company. You may be able to sue the IUL company, or the marketer who sold you the policy, in federal or state court. Investors have been fighting back when they believe that they were victims of wrongdoing.

You can speak to an attorney by calling us today at (803)-805-7546 or by sending us a message through our website. You owe us nothing unless you win your lawsuit and receive financial compensation.

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