31 Replies to “Indexed Universal Life Insurance Disaster Case Study – IUL Illustration Risk – IUL Pros and Cons”

  1. This guy is funny. He uses an argument to say an IUL is not good, then shoots his alternative is better, when in fact it is still an indexed product. On top of that, he says you cannot use averages to illustrate…really? Because that is literally what all of us use he also fails to mention that the IUL can and should be structured per individual case oh he also fails to mention that they are flexible and can be changed when you need to as your needs change. Got to love guys like this who try and scare people just to sell their own product

  2. -He is bias, but MassMutual is an excellent company, and probably the best whole life product for retirement income.

    The first thing we have to ask, is what the policy is going to be used for?

    If it is used for retirement income, then here is how I compare the IUL vs WL:

    Whole Life has a lot more guarantees that IUL and must always be over-funded. If you are selling a client a whole life policy minimal payments, you are doing a disservice, and he/she should be purchasing term with living benefits…… However, if you are healthy enough to get it, MM WL is one of the best investments for RETIREMENT — because people are getting what they want — i.e.- a check that comes in the mail every year. And no more premium cost is a big thing too…. Must always to "limited pay" with WL — Important to know how to properly fund it***

    IUL has much less guarantees, and also must be over-funded for retirement income. It has more upside, but these illustrations it produces, which shows the clients check, is a fantasy for a lot of reasons.. But mainly because it is attached to the index, not the entire S&P – meaning it doesn't get the dividend (3.5%)

    SO IF THE STOCK MARKET IS AT AN ALL TIME HIGH, IS IT A GOOD OR BAD IDEA TO INVEST IN ONE RIGHT NOW?
    -No, because if market gets 7%, then the IUL only gets 4%

    Either way, it's important to Over-fund always in my opinion with Permanent insurance

  3. Good video. What's the solution then to your point on the potentially high cost of an IUL? Also, as another question let me ask… what's the alternative to IUL (if any)?? Thanks.

  4. Hi Dan. Since your client invested his premium in an IUL at the market bottom in 2009, and it's averaged 24% annually since then, he received the maximum crediting. Please use his illustrations as an example of how bad the IUL is. You've got an 8 yr-old example right here.

    What does his initial illustration show compared to the last in-force illustration? Tell us where the divergence came. And best, show us the difference between his 2009 IUL and a comparable WL policy, had he gone that route. Thanks for your facilitation of the discussion.

  5. with IUL, you must keep contributing at target premium in the first 10 years…the real growth happens after 10 years, it is a long term investment. in the first 10 years, don't expect money to grow much since there are lots of fees. but If you keep paying premiums for 10-15 years straight, one will make a good amount of cash….i would say good investment for young people with stable jobs…have you forgotten the insurance, flexible premiums, and tax free "loans" as well?

  6. Dan I see that you talk about the cost of insurance skyrocketing around the age of retirement. That is true for IUL's and any other type of insurance. All life insurance is the same as they all use the mortality table, they are just financed differently. Now the whole point of that is to switch to option A to freeze the cost of insurance and start distributing your money. At this point in time the death benefit does nothing for you except make it a legal policy under a insurance company. You are now self insured with no need for the death benefit. These policies should not be built for investing/saving and insurance benefits. You cant have you cake and eat it to, you have to choose one or the other.

  7. can we talk about that no index vehicle, whether they are annuities or life insurance use a 100% participation and unlimited cap and 0% floor. most use a 3% cap, with a 50% participation and 0% floor, or 100% participation, with a 1.5% cap and 0% floor.

    effectively you wont get returns greater than 2.5-3% returns, which net of expenses which for annuities are from 0.5% to 1.0% (excluding rider charges), your net return is hardly greater than a savings account.

  8. Hey Dan I am actually a owner of BOTH a par. WL well actually 2 now and a IUL
    I have had major issues with receiving a dividend in the last 2 year with my WL carrier (MTL)..although I will say the only thing that is keeping that policy a float in the guaranteed increase that it does every year(since 2011) I suspect the fact that I took out loans against it (IBC type of stuff) some how degraded my WL policy to the point where I received no dividends in 2015 OR 2016! I have a CV of 45.5k but my cost bais is $47k =/ in for a policy that has been inforce for 6 years now I expected to be slightly up but would hv accepted being at leave even by now…..I do know much more about this stuff then I ever did back in 2011 I supect a better carrier is what is needed and def. one that is Non-direct rec as oppose to Direct Rec….so a 1035 exchange is prob in order because a inforce leger now show this policy to be a very very bad investment over time even if I stop using policy loans and just paid the 8k premium and let it sit the irr At age 65 will be between 1.5-1.9% (a42 now)

    HOWEVER I do also own a IUL (2016) and I can already see potential for MAJOR concerns down the road with these contracts…IUL's are really more like a well if it performs its can be the greatest thing ever but if the market underperforms and or create ZERO or negative return I can see how this can be very dangerous !!! Its more hypothetical at this point seeing how my poicy is only a year old but I cannot lie I am worried about that IUL contract. I think BOTH WL and IUL are not be sold properly there are benefits to owning a life insurance contract that STILL out way a money market account or savings account a WL is going to produce something over 1% 100% of the time for sure will it get up to 6% prob not but 3%-4% I would say can be achieved with a good carrier …with IUL once again its just a big ? or a IDK what this thing is going to do over time . IUL come off as sooo much sexier than WL but do you marry sexy or substance

    Like I said I am disappointed with my first WL contract i have received $115 dollars in dividends since 2011…now in contrast I started a new WL contact with a different carrier that has paid me $235 dollars on it FIRST policy year anniversary ! So take that how you want to . I still hv the MTL policy but it has to go n im not sure quite how to handle it. The IUL is my great experiment I will never buy another one so this one is either going to live up to the hype or its very much not!! only time will tell. I have structured it for monthly premium paymeny more so for dollar cost averaging and half of the year 50% of those payments go into the fixed account to ensure I NEVER get a zero how ever in doing this also strips away my up side even lower that current caps but hey this has to be done to better sleep at night for me now that I can see this IUL much better for what it really is a potential for disaster lol like a nuclear power plant…if its does it job wonderful , but the threat of a meltdown is as real as it is for a Nuke Plant

    Hey Dan i'd REALLY like to hear your thoughts on this SFI Premium Financing stuff where they get rich ppl to take out 5 10 n 15 million dollar loans with a bank to fund a IUL policy in hopes that in 7 -10 years the IUL will pay off said loan and interest with a policy loan against the policy and whats left over is to grow and to be used even later in life as tax-free income(loans) in retirement . effectively giving the rich person a "FREE IUL " using the banks money but a PG with the rich person….Now THATS SCARY if the IUL impodes as you say!

  9. Dan, after watching your video, I AGAIN challenge you to compare your WL to a properly constructed IUL built for income against your best WL policy.  Dan, please produce your WL Policy Illustration INCLUDING the fees, on your WL policy (oops, that's right WL does not show the fees they charge. 🙂 and I will run an IUl using the same age and premium and rating class and we can compare them.  We will use a CAGR of 6.5% and you use whatever.   Lets use age 45, $10k per year premium paid monthly, income at age 66 and a standard health rating.  I am not knocking a WL policy, I am sure they are good to some degree, but you knock an IUL without showing a true side by side comparison.  Lets let the math speak for itself.  ARE YOU UP FOR THE CHALLANGE???  SEND YOUR INFO TO ME BY EMAIL AT steve@iulagent.com

    ps.  I do believe that an IUl or a WL is far better than a qualified plan.

  10. Hi Dan – Great video. I think a percentage whole life should be in everyone's portfolio once they have maxed our 401k, Roth IRA, etc. I own two northwestern mutual whole life policies and am in my late 20s. The intent is to pay into it early and have the flexibility to take a reduce paid up later in life to keep that policy forever. Do you like the strategy? Also, any feedback on northwestern mutual?

  11. Dan, I Have a little suggestion. Instead of been Whole Life insurance agent/Broker, you should become an criminal defense attorney. There is nothing you couldn't turn it upside down, fault into right, yellow into blue. I am glad I find these comments here, those are great training material for my  agents to study on how to sell IUL.

  12. The IUL that was presented to me was a total ripoff. Over 30% of the policy costs were attributed to "expense and deductions". So even if they ever yielded 8% to the cash value portion, I would still be losing my rear-end off.

  13. Hey Dan, thank you for the content. Few quick questions for you. What if you were to fund the policy to the max and use as little death benefits as possible to focus on CV? Will the policy sustain its self if the policy holder knows how to use it for retirement and not just drain the cash? Also, even though the policy may not do exactly what is illustrated, will it still out preform the WL policy (even if that is only by a little)? If I were to have an IUL policy and take distributions to supplement my retirement (and lets say I tripple my money) but still end up lapsing the policy, could it be worth it after all the living benefit? Appreciate any feedback. Thanks!

  14. Hello, I am impressed of the way trying to describe a product relates to its cons mainly. Did you ever look at the death benefit or any other riders that might reflect the positive side of it? an another little topic How will you consider the product a failure in such a short time?

  15. So Dan,

    I am trying to put this video/ topic into a larger context. I see what you are saying- that an IUL's con may be that its hypothetical growth is hardly ever achieved because of market growth caps, and costs. But are you arguing that an IUL is not a good financial investment, or just that it is not as superior as many make it out to be?

    I am only 26, so for someone like me I am really enticed by the market-loss protection it offers, as well as it being tax free growth, with a death benefit option, and of course the market index capabilities. Overtime, the compound interest growth seems very consistent except the costs of it. And I mean 401ks are similar in that they also come with fees.

    But I mean anyway what is the big message from this video- that we should invest elsewhere, or to just be realistic and factor the costs of an UIL when tracking long term growth and still participate in it?

  16. Dan. I believe you need to do some more product research. There is no longer a company that is allow to run illustration 8-10%. You might want to check out the new law pass by department of insurance on AG 49, which limits the number agents are allow to run illustration. Also to address your comments on the hypothetical interest credit, it is not hypothetical sorry, there is record on the average rate of return that the index have credit, so its a proven fact on those rate of return. Also to address the cost part, yes there will be cost during the time when market is down, which is when the return is 0%, but first, there are IUL policy that guarantee 2% floor so maybe you need to do more research on each product provider. Also you have to think of it this way, when the market is down 10% if you can have a floor of 0%, then you win because while other are losing money, you are protected by a safety net which then you dont lose anything. And of course there will be cost because it is a life policy. Lastly, if you can actually find policy using a IUL vs Whole Life starting from 1990, you can actually see that the IUL has out perform Whole Life. And if you do research on the past performance of index strategy, you will find that index has outperform all other investment strategy, which is the most consumer friendly product out there.

  17. I know it might be a bit to ask but, I can't find the information anywhere else. Can you proved some numbers (estimates of course) on how much you gain and how much you loose with a uli each year? It's easier for me to understand concepts if I graph what happens over a period of time. I'm trying to put together how much would you loose/ gain with each year from 1970 to 2015 and getting a tad confused because I have no idea how much the insurance would go up as one ages, and how much it would effect the final result. Thanks!

  18. ow Dan , thanks! The illustration I saw showed varying percentages each year. What happens for the qualified plans that runa negative, are there any costs associated with it as well? If so, what are the average costs associated with the qualified plans in comparison with the costs of an IUL?

  19. Gee, what's the APR on a policy loan from a whole life policy? Most IULs is under 1%.
    How many years at 4% interest does a whole life policy need to get to catch up to one year of an IUL at 20%?

  20. https://youtu.be/eNo9HLgbax0

    I think this will put things to bed for you. a Roth IRA has a limited amount you can contribute to each year that will give a small return over many years. 401k for 60 minutes explains why people lose in the stock market and when you can borrow money tax free without having to replay the loan and your principal continues to grow and your beneficiaries receive the death benefit Tax Free and when the IUL endows at 119 years old I have never seen the money after you stop contributing to the policy lose value. Have you? Here is another proven fact that will put holes in your videos on the disaster of an IUL. https://youtu.be/7YZYDgQ_X2Y since you are putting an Opinion that is based on no facts other than just a piece of one portion of an illustration I guess that the determines they are NOT any good. An IUL is a proven product to out perform the stock market as Zero is the Hero. There is always a cost of insurance even with a whole life policy. I have a friend and client who has had one since he was a child and is 36 and it has 9k in it I guess after 30 years you would call that great returns? My guess is you are a financial planner and Not an insurance agent. I work with one of the largest reinsurance company's on the globe and have an MGA that has 32 years in the financial services industries and worked for AIG and many others over the years. The IUL to cover you with Life Insurance along Living Benefits that covers all the ABR'S and blending it with a FIA is the best combination for any form of Retirment. VUL'S are bad and having an IRA, 401k or Roth have limitations and Huge Tax consequences. The IUL will provide Tax Free options for the rest of their life while providing a life insurance policy and beneficiaries with a Tax Free payout upon death. Your statement for living too long is inaccurate. You should do your homework on NLG. Best of luck to you. And just so you know, more people disagree with you than do. If you are NOT a licensed insurance agent the conversation is moot. If you are, I highly suggest you do more research. Watch the videos I have attached, you will have a better understanding.

  21. Dan. you are farther from the truth. what does the IUL also provide that you fail to mention. Oh, that's right… LIFE insurance. Also may have been provided living benefits. the IUL has put performed any IA, Roth IRA, 401k, which has REALLY HUGE pitfalls. and you think that losing principal is not a bad thing okay that's true. But you left out the most important fact there is a cost to have LIFE INSURANCE as well. Death Benefit, Riders, Guaranteed Income Riders. you can't use one illustration and say it's bad. If you want to learn about why the IUL IS THE BEST Retirement Vehicle on the planet email me at cskinner@myvipco.com. Thanks!

  22. you are forgetting that most of those cost goto the insurance you have and the living benefits it provides. Also those policy charges of over 3k were just for the first 5 or so years. Not all insurance companies charge that anyway. And it is illegal to show illistrations of 8-10%. Your numbers are off.

  23. Question: How long have you been in the business?-Really? Ok

    I will use your own words against you.
    "It can’t AVERAGE 6%, it has to Actually get 6% every year, year in and
    year out, never missing a year without fail to get to the results as the
    illustration shows.
    Do you think that will happen?
    It never has happened and after watching the market for 30 years, I’m
    guessing it never will, especially when you are looking at an
    illustration period of 20 to 30 years out."
    Let's start with you first statement "It can't AVERAGE 6%," your right, ITS COMPOUNDING OVER 7.25%!AVERAGE ANNUAL IS LIGHT YEARS BEHIND COMPOUNDED RATE OF RETURN. I'm not going
    to teach you the difference. Albert Einstein called compound interest
    man's greatest invention-look it up.
    Now your thinking where is my proof the IUL IS getting over 7.25%
    COMPOUNDED RATE OF RETURN including the last two recent financial
    collapses where the IUL had no gains.
    I'm sending you a 17 year look back of the actual S&P 500 index as the
    IUL tracks it with a 15% cap. This chart is from December 31-December
    31, year to year point to point. Translation: $100,000 turns into
    $329,049. It made NOTHING at the end of 2015 and still yielded 7.26%
    COMPOUNDED ROR.

    Your words; " It never has happened and after watching the market for 30 years, I’m
    guessing it never will,"Really? It's NEVER happened? It happened in the last 17 years. That's right your guessing. You never checked.

    Your mouth is open before you even learned how these actually work. You
    sound like a mutual fund clown who adds percentages like whole numbers,
    doesn't know any better and teaches it to unsuspecting clients.

    Let me ask you a question. Do you really think the insurance industry could
    get away with illustrating look back returns of between 7-9% in an
    illustration if it didn't add up?

    The insurance industry is the most highly rated industry in the country the likes of which no other industry endures.

    Question do I have to show you how to calculate a COMPOUNDED rate of return? Use or go buy one.How long have you been in the business? I DON'T BELIEVE YOU.

    Since you hacked the IUL
    I refuse to teach you anything else. Read the chart and eat your words.

  24. Dan – the whole life products from mass mutual you sell have even greater charges embedded in them. Seems disingenuous for you to bash IUL in this manner!

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