Why I Will Not Sell Universal Life Insurance
I have access to Universal Life products. I choose not to sell them. This post explains why — and it has everything to do with fiduciary responsibility and an 88% failure rate.
What "Fiduciary" Actually Means
A fiduciary is required to act in the client's best interest — not in the interest of generating commissions, not in the interest of the insurance company, and not in the interest of making a sale. When I examine Universal Life products against that standard, I can't square the two.
Where Universal Life Came From
Universal Life was created in 1978 by Jack Barger at E.F. Hutton — not as a retirement vehicle, not as a wealth-building tool, but as part of tax avoidance strategies. It received an "insurance" label through congressional approval. The product was designed around a Wall Street orientation from the beginning, and that orientation is baked into its structure.
The Cost of Insurance Problem
Universal Life uses what's called Annually Renewable Term (ART) architecture. That means the cost of insurance starts low and increases every single year. Unlike whole life, where the cost of insurance is level for life, UL's internal costs continuously escalate.
As you age, the insurance company can withdraw cash from your policy to cover rising costs. This cash erosion threatens the policy's viability — and most policyholders don't see it happening until it's too late.
The Three UL Structures — All Problematic
- Crediting-Rate UL: Fixed interest rates set by the issuer, which can be decreased at will
- Variable UL (VUL): Sub-accounts resembling mutual funds — you bear full market risk inside an insurance policy
- Indexed UL (IUL): Participation in market indices between a floor and a cap — sounds protective, but the cap can be lowered, and the costs still rise
The Marketing Claims That Don't Hold Up
"Flexible premiums" — this sounds like a feature but functions as a trap. It encourages overfunding in early years to mask cost erosion later.
"Can't lose money" — misleading when the Cost of Insurance constantly grows and erodes cash value regardless of market performance.
Straight-line projections — illustrations use average returns to project smooth, consistent growth. But these projections ignore volatility entirely, creating fictional consistency in an inconsistent environment.
The lapse rate: Research shows an 88% policy lapse rate for Universal Life products. That means 9 out of 10 policies don't end in a death claim — they collapse. When a policy lapses, previously paid premiums become profit for the insurer and coverage disappears — often just when the policyholder needs it most.
Guaranteed Universal Life Isn't the Answer Either
Guaranteed Universal Life (GUL) sounds safer. The guarantee applies only to the death benefit — not to the policy's performance or cash value. And here's the catch: missed or late premium payments can erase those guarantees entirely. For aging policyholders who may have irregular income or cognitive challenges, that's a serious risk.
The LTC Rider Problem
Many UL policies are sold with Long-Term Care riders attached. But if the UL policy lapses due to expense erosion — precisely when coverage becomes most valuable as the policyholder ages — that LTC rider disappears along with it. You've paid premiums for decades and have nothing when you need it most.
My Position
An 88% failure rate is not a product I can recommend in good conscience when acting in a client's genuine best interest. Universal Life was designed for speculators with imminent death expectations or very specific tax situations — not for the average person building toward a secure retirement. There are better tools that have worked for over 160 years without these structural flaws.