I’ve been life-licensed for 2 years and been with about 7 outfits during that time. The first outfit got me into an IUL policy. IUL is bad enough, but they used a blended index called the pacesetter index which led to 5 straight 0% annual interest credits when the S&P was returning double digits.
I observed the holy war between WL and IUL and figured it was just like iPhone vs android, lyft v. uber and home depot v. lowes: a bunch of people trying to make something better which were really about the same.
But I did look at Truth Concept’s criticism of IUl closely – https://truthconcepts.com/the-top-10-reasons-not-to-buy-equity-indexed-universal-life/ … but found nothing there of significance.
Then I saw this video [IUL & VUL Exposed Why Better Returns Is a Trap](https://www.youtube.com/watch?v=lO2YvQx1Oz0) and until someone can refute all the notes I took on that video, I have to remain firmly in the WL camp for my whole life.
Below, ART is short for annually renewable term.
Universal life = ART with side account that creates cash value
- there is no requirement for premium to stay level (and it wont because it’s ART)
- customer is taking on the risk
- not the product to bank with
- if you want returns, look for an investment
Universal life lacks non-forfeiture options, whole life has them
If a person cant pay premiums
- can direct dividends to pay premium
- do reduced paid-up
- premium offset: partial surrenders of paid-up insurance
- caveat: there is an overloan protection rider on my policy
- bottom line: you can stop paying premium and not need to surrender the policy
UL lacks infinite banking function
Universal life premiums are not guaranteed
- in contrast whole life guarantees level premiums
- they reserve the right to go to maximum fee structure
UL has serious tax consequences
if you take policy loans for whatever reason. not paying premiums, CV being taken. receive letter saying you need to pay more. Policy cancels… anything above premium you paid in that tax year is a taxable event at ordinary income rates (not dividend rates)
IUL Zero-percent floor loses CV
you are not gaining in the 0% year and you may not have lost as much as the market did, but you are paying COI
continuous zero years at an old age have problems keeping up with ART
Valuable aspects of whole life
- non-forfeiture
- 100 years of success of paying dividends every month – not guaranteed
- level premium guaranteed and based on mortality table
- (?) 37:00 no more costs after first 8 years?
- (?) You’re making more than a dollar in cash value for every dollar premium you pay in
- uninterrupted compounding
Anti-IUL ammunition
Ask your IUL agent this:
- how do you use this to finance the things of life and become your own banker
- if market has a negative return will lose CV
- when can stop paying premium
- Will COI increase as I age and if so what will it be at age 85. how much will premium be to keep policy active
- Should I plan to keep this policy for the rest of my life even if I live to be 100 or is there an optimal time to surrender it
- How much will I earn on the cash value even if I have a policy loan
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