Wednesday, October 01 2014
I found an interesting article published recently regarding the IUL, my personal favorite financial product. I’m always looking for new information, changes in the industry and particular carriers, and to evaluate both positive and negative reviews on the concept. To be sure, this is a concept, with many variables between particular product providers (companies) and the products they offer. It is a very flexible product, which is customized to each client; it is not a cookie-cutter or rate-book product. This causes it to be misunderstood and misapplied by some financial experts who are more familiar with non-customized products such as mutual funds.
I have highlighted a few interesting comments in this article and included my responses. Feel free to form your own opinion about this perspective!
Kellie Austin, PLIA, Licensed and Insured
The Skyline Group
Indexed Universal Life Insurance: A Rip-Off with a Fancy Name
May 15th 2014 9:15AM dailyfinance.com
How would you like to put money into a financial product that lets you benefit from market gains, but never feel the pain of its losses? The money and growth inside the policy will be 100 percent tax-free for life. That's the seductive pitch often used to tout an investment called indexed universal life insurance.
Among the reasons why:
· The projections that were illustrated for him were not realistic.
· The expenses of the insurance and many other hidden fees come out daily(2)
· The guaranteed growth of 3 percent was only payable at policy cancellation(3)
(2) Every financial product has fees. The IUL discloses all fees, unlike many investment accounts, such as 401(k), which, by law, do NOT have to disclose the majority of fees. Fees are charged monthly, and a well-designed IUL will earn interest on the entire amount of premium – before any cost of insurance.
(3)This sad soul may have gotten a product with a delayed guarantee, similar to an annuity; however, this isn’t true for any of the products I offer, nor any I have evaluated.
Much worse was the bill when he turned 70. This policy was structured with a 20-year guaranteed term policy for the death benefit, and his premium hit almost $50,000 -- and not one nickel was going into any cash value.
(4) Anyone who is vehemently against a class of products in a black and white dynamic has already demonstrated a lack of logic or expertise. This is a typical blanket assessment of an author or spokesperson who has built a career around generic statements which can never be related to a specific product or individual. Let’s do a comparable analysis of the prospectus for client’s funds inside a 401(k) or mutual fund account prior to the 53% drop in the market of 2008/2009. The IUL never participates in the down-side of the market which allows all illustrations to be far more reliable than traditional investment projections.
This author certainly believes what he is saying, however, perspective has a funny way of blinding people to a reality with which they don’t agree.
There is no perfect financial product. Understanding the “lock and reset” feature to prevent loss in a down market, and the arbitrage capacity to be your own bank and provide income regardless of how long you may live are just a few features that do make the IUL a unique and incredible financial product. It should be designed and presented by a licensed professional who understands not only the big picture features, but is able to select the best carriers and versions of the IUL to meet the client’s particular needs and financial goals. As with any financial product, it is not static, it requires some level of maintenance and upkeep between the agent and the client over the years to ensure changing needs and financial ability to fund are in line with the product design. The IUL is the most flexible product to allow it to conform to these changing needs and goals.
*Kellie Austin is a professional life insurance agent, licensed in GA, TN, FL, VA, WV, NC, MI and OH. She is the owner of The Skyline Group and represents multiple carriers of her choosing, based on the best market availability. She is not salaried or a paid marketer for any provider. Kellie is a single mother of five school-age children and owns the products she recommends for clients, based on her personal needs and commitment to protecting herself and her family against risk and providing for her future financial goals.
The Skyline Group