Universal Life Insurance — Regulators' Warnings
We don't sell Universal Life insurance — despite the fact that UL commissions run approximately 100% higher per policy than the products we do recommend. The reason is simple: the product's structural flaws make it difficult to recommend in good conscience, and regulators across the country have begun saying so officially.
The Misleading Claims Regulators Have Flagged
- Growth projections: Salespeople commonly tout guaranteed returns using straight-line projections that don't account for market volatility or changing internal costs. These projections create expectations the product routinely fails to meet.
- Premium cessation: Policyholders are often told they can stop making premium payments once enough cash accumulates. This claim frequently proves false when markets underperform or internal costs rise.
- Permanence misconception: Universal Life is marketed as permanent insurance. But it can lapse — and will lapse — if insufficient cash remains to cover rising internal costs. "Permanent" is not guaranteed.
- Market protection myth: IUL policies are often marketed as protecting against market losses. What they don't disclose clearly is that the insurer may withdraw funds from policyholder cash values to cover hedge costs, regardless of market performance.
Three Major Concerns
Beyond the marketing claims, there are structural concerns that apply across all UL product types:
- UL products perform best — and often only work as illustrated — if death occurs within the first decade of the policy
- Salespeople frequently understand commission structures far better than the products' inherent risks
- Insurance companies retain the unilateral right to increase internal costs and decrease growth factors
Official Regulatory Warnings
Both the New York State Department of Financial Services and the Texas Department of Insurance have issued formal warnings about Universal Life products. Texas produced a video warning specifically to help consumers understand the risks before purchasing.
When state regulators formally warn consumers about a product, that's a significant signal. We took that signal seriously long before those warnings were published — and it's one reason why we've never sold Universal Life in any of its forms.