Q&A: Opinion of IUL Policies
Question:
I am curious as to your opinion of IUL policies? They seem to me to substantially overpromise, and they are too complicated for me to understand! Would love to hear what you think.
Answer:
Regarding IUL, I say “There’s not bad insurance as much as there is insurance done badly.”
I think some IUL products can serve a purpose just as whole life can… and GUL, VUL, term, private placement, etc. However, almost no consumers understa
nd it and too many agents don’t either. There is too great a chance for abuse and I believe the typically illustrated crediting rates are too aggressive. Stress testing and independent modeling prove this out.
I think the industry is setting itself up for a repeat of the VUL disaster. If IUL is utilized it should be built like a VUL should be; minimum death benefit with maximum funding with prospective clients seeing how it performs at conservative return assumptions.
Too often I see IUL being used a competitive spreadsheet tool to win deals. High death benefits with insufficient funding at AG49 rates are a recipe for failure.
Does that answer your question? Thanks again for reaching out and enjoy your day.
Bill
I agree with you Bill. The illustrations and the numbers being shown are not of this world and the internal fees of some of these IUL offerings are unbelievable. I like Dick Weber’s line about how they add their “secret sauce” to the illustrations and to your point, most agents do not understand what they are presenting. Clients are buying these things and think that you have a kazillion dollars of tax-free income when they retire. I think that many will be disappointed and our industry will face another debacle like we did with “vanishing premiums” back in the day.