Universal Life Insurance - Regulators' Warnings
It isn’t often that insurance regulators, in any state, come right out and issue a warning about a product in the financial industry. A product that is marketed as a wonder drug or an answer to everyone’s prayers. Links below…
Universal Life Insurance.
Universal Life comes in a few different styles: Universal Life (UL created in 1978), Variable Universal Life (VUL with “sub-accounts” investing) and Indexed Universal Life (IUL with related index investing). There’s also Guaranteed UL (GUL), and Survivorship UL (SUL).
We do not sell any form of UL. We can, but don’t, even though we’ve been approached almost daily to do so for many, many years.
If we did, our commissions would be as much as 100% higher per policy. In addition, we’d have very unhappy clients in just a matter of time.
We stand proud of our conviction to protect our clients and to put more money into their pockets than into ours.
PLEASE BE AWARE:
1) UL products are not as fruitful as they might seem. They work best if you plan to die in the first 10 years of ownership.
2) While company “disclaimers” regarding risk are numerous, they are typically not explained thoroughly by the salesperson. Often, the salesperson doesn’t even fully understand the inherent risks that you would undertake as a UL policyowner. However, he has a full grasp of his commission structure.
3) Has your UL agent ever stated any of the following? If so, we suggest getting a third-party review.
a. “You’ll never lose money from a stock market drop!” – But, if your premium does not cover costs, the company will take money from your cash! Doesn’t that qualify as losing money?
b. “You can rest your retirement on this” – If you don’t grow enough cash over time due to market volatility, any loans for retirement could endanger or lapse your policy.
c. “Look how much money you’ll have using this growth rate!” – Market volatility destroys the growth rate because illustrations use “straight-line projections.”
d. “You’ll be able to stop paying premiums because of the growth in year (20 or 30, etc.)” –Stopping premiums require sufficient cash in the policy to support the continuing costs of the policy. See “c.” above.
e. “It’s guaranteed!” – There are no guarantees of cash growth, and any misstep in premium payment will erase a guarantee in death benefit.
f. “It’s permanent!” – In people’s minds, “permanent” means the policy will be in-force on the day you die. Unfortunately, that is often not the case. See a., b., c., d., and e. above.
Regardless of whether your policy is showing a profit or loss, the insurance company reserves the right to further increase costs beyond the original level, decrease growth factors and make certain their interests come before yours!
Here is the link to the New York State Department of Financial Services, and their warning:
https://www.dfs.ny.gov/consumers/alerts/universal_life_insurance
Here is the link to a warning video from the Texas Department of Insurance regarding Universal Life:
https://www.youtube.com/watch?v=iw1GQRSZNZw
These warnings should scare you and cause major concern. If you currently own any form of Universal Life insurance, call us! We will help you analyze the policy for sustainability.
If you don’t own it, but are considering a UL purchase, stay away. It’s not what it seems to be. If it were, we’d sell it too.