Protect What Matters
Indexed Universal Life Doomed for Failure Introduction
Life Insurance Types
Throughout the history of life insurance, products come and products go. Each time a new product is introduced, it seems to have some sort of sizzle that causes agents and brokerage firms to push it on to the consumer; even when the product has not been proved to work. A product is introduced and it is accompanied by a theory of success. The product itself has not been proven, but theoretically it appears to work and be beneficial. Such is the case of the Indexed Universal Life (IUL) Insurance policy, which has gained popularity since its inception back in 1997. Yes, you read that right, the IUL insurance policy was introduced to the insurance industry in 1997. The first one was written and issued by Trans America Life Insurance in 1997. Since then, it has been promoted heavily by agents and brokers alike.
One truth about life insurance agents and brokerage firms is that they move like water; always seeking the path of least resistance. What this means is that they will seek those products which have gained popularity and they will try to sell as much of that product while it’s still “Hot”, if I may say it that way. Currently, the “Hot” product is called Indexed Universal Life (IUL) and agents and brokerage firms are selling it as if it was a stack of hot pancakes. There is even multi-level marketing companies (MLM) which are recruiting agents heavily to go out and sell this product to their friends and family. Some of those recruited agents are brand new agents, with no experience, no track record, and to be honest, pretty naive about the products they are told to promote. These MLM companies bring agents on board, sell them an IUL policy, and then have them go out to their friends and family, sell them an IUL policy, and recruit them to become licensed agents and repeat the same process all over. The result is a huge selling force that has very little product knowledge, misinformation, and even fabrications which are presented to the end consumer as facts. The reality is that the end consumer is, unsuspectingly, being used as a guinea pig to test the product. It is my, and the opinion of many other financial professionals, that those consumers will suffer the consequence of an untested, unproven product.
I have had the opportunity to interview agents on their knowledge of the IUL, and I tell them that I will buy an IUL from them if they can satisfactorily answer all my questions about the product. So far, all have failed. Some of them don’t have a clue about what’s happening behind the scenes. This is being written to help you, the consumer, to not fall prey to the massive force of agents that is looking for a quick sale.
To start off, it is important that you have a basic understanding of how life insurance works, the three major types of policies and how they are designed. This basic understanding will help you to not get lost as we get into the specifics and the mechanics of the IUL. The goal is to equip you with the education that almost no one is providing to you. This is crucial knowledge that will allow you to control your financial future. As you gain this financial knowledge, you will be able to make better investment decisions, which will result in a brighter financial future for you and your family.
Throughout my financial career I have found that there is a massive lack of education, understanding, and realistic risk as expectations. Some of those unrealistic risk expectations are deliberately implanted in your brain by the delivery of false information. After all, if everyone knew what to ask and what to look for in a policy, those hungry agents looking for a quick sale may not sell anything jat all.
As a foundational tool, there are some predictable and safe ways to use life insurance. There are some options which appear, and even sound good, but with a high level of risk. On the next page, we are going to discuss the various insurance types; mechanics, pros and cons. Remember, it is important that you understand this basic information in order that you become and stay an informed consumer. With that said, let’s dig into it.