Protect What Matters
Indexed Universal Life Doomed for Failure Part 12
At the end of the last section (Part 11) I mentioned marketing companies. When you hear radio ads about how wall street is ripping you off and how they have the secret to rigging the void game, you’ve most likely found an IUL sales force. They offer you a free book and the proceed to tell you all these secrets of the wealthy. Ooh, how exciting, they are going to reveal secrets! The purpose is to make you believe that the wealthy became wealthy by owing IUL policies. It’s simply not true. It is frustrating to see how many openly spread those false and misleading statements.
The last time this industry experienced a sales surge like this one was back in the late 80’s early 90’s with a product called Variable Universal Life (VUL). As we’ve already discussed, the VUL did not turn out to be the miracle cure it was supposed to be and people lost fortunes. Currently, it appears that every agent and broker is jumping on the bandwagon to sell as much IUL as they can before the curtain opens up and exposes the IUL for what it really is, just a UL.
Back in the .com boom of the 90’s, everyone seemed to be an expert stock picker, day trading was all the rage, people were buying and trading stocks like crazy, day trading shops were opening on every block (it seemed) in every downtown, huge leverage was extended to those traders. And then the bust. All the day trading shops dried up. We have seen this twice in the insurance industry. First it was the UL in the 80’s, and then the VUL in the 90’s which turned out to be disasters. The IUL is the new shiny object that all advisers want to sell. One of the ways they sell it is by telling you about the wealthy people who have bought it. Radio ads tell you that Ray Crock, Walt Disney, JC Penney and other wealthy individuals used these secrets to build their wealth. Again, I can’t tell you how misleading that information is (if they’re willing to mislead you on this, what else are they willing to mislead you on?). Here are the facts:
IUL came into existence in 1997; the first one was issued by Trans America. Try to find someone who owns one of those early policies that were issued. You’ll soon discover that it’s like finding a mermaid or a unicorn.
Ok. So, let’s see how these wealthy men were able to use the IUL “secret” to get wealthy. Walt Disney died in December of 1966. So, how did he own an IUL policy that did not come into existence until 1997? He died 31 years before the firs IUL appeared on the scene. Just a tab misleading, right? What about Ray Kroc, the founder of McDonalds. Ray Kroc supposedly used an IUL as well. Let’s see. Ray Kroc died in January of 1984. Oh oh! Hey, that’s only 13 years before the IUL appeared. Well, at least we’re getting closer right? Then there’s JC Penney who supposedly used an IUL to build his wealth. JC Penney died at the age of 95. However, he died in 1975, 22 years before the inception of the IUL. The truth is, had JC Penney owned an IUL and lived to age 95, not even he would’ve been able to afford the premiums. So, if they are not telling you the truth, could there be more that they are not telling you. Let me telling what IS truth…
All these men owned Whole Life policies, not IULs as we’ve seen it is just not possible. Each of them used the cash value in their policies to build their businesses. As with all whole life, their policies were designed to level off costs, pay off the policies, and actually own them free and clear. Chances are that Walt Disney, Ray Kroc, and JC Penney all had their policies paid off before they died. Because of the solid model of the whole life, none of these policies implode on these men.
One very successful agent made some very interesting comments. He said that “All the wealthy people buy IULs.“ Then he went on to say that the biggest secret of the wealthy is that “…they’ve been using IULs for over 120 years…” I find that facts get in the way of some of those IUL guys. Facts like returns, costs, aging, deceptive market returns, etcetera. It seems that they are on a mission: sell, sell, sell because we don’t know how long this frenzy will last. Pretty sad, but, this is the world we live in.
Now, to end this section on a good note, you can still own what Walt Disney, Ray Kroc, and JC Penney owned. In fact, you may own the same type of policy with even more benefits. We are living longer and healthier lives than these successful businessmen. Look into it for yourself and see if it’s a good fit for you.
From now on, when you hear that the rich buy IULs, you will know that if the policy was bought prior to 1997, it is NOT an IUL; it is most likely a Whole Life. Not even one generation has passed that’s owned an IUL. It is still untested, untried, and simply untrue. Here is what’s true: banks, corporations, and wealthy individuals do buy Whole Life and lots of it.
In the next section, I will share with you the last sly of hands that has recently emerged in the UL world. Let’s go there now.
Life Insurance Types