Where does the money driving the alleged 8% and higher annual gains in indexed universal life policies come from? The life insurance agents that sell the product as a no risk way to have life insurance and retire have several crediting methods at their disposal but most often pointed to is some form of point to point method using the S&P 500. Though we’ve never actually had someone provide the proof of those kind of large net cash value gains over any period of time longer than a year, clients are led to believe they can and should expect that average over the long haul.
This is a good time to bring this up with the S&P being at a record high along with the DOW. So an email comes today from an investment firm with eye popping bullets like “four best stocks and seven worst stocks to invest in” and “S&P at an all time high” and “stocks that average over 467% gain”.
This post was actually started a few weeks ago and got sidetracked. First, you should know that we decided against spending the money to find out about the four best stocks and the stocks that average over a 467% gain. The S&P has fallen from it’s pinnacle of 1709 and we were never quite able to wrap our minds around 467% and knowing that it wasn’t likely to be part of an indexed UL crediting method it didn’t make sense to chase in the context to of this post.
One of the things that has kept us from jumping on the IUL train isn’t just the noted 8%+ annual gain and the fact that no one has ever been able to show us an actual policy that has netted that kind of gain historically, but in that bluster about the customer being the recipient of a bombproof life insurance and retirement plan, there has to be room for profit. No company in their right mind is going to pay out a net 8% to its’ customers and just be satisfied with the small profit on the life insurance policy. It only makes sense that if they’re willing to part with 8% or more then they have to be making considerably more than that on their investments. 467%?
Maybe the insurance companies put all of their money in the four best stocks and then, having pocketed 459%, they claim that the S&P is the miracle investment of the last 100 years and give you 8%. But if that were true wouldn’t it be easy to come up with the real live policy that would prove it?
We’re starting to believe that the IUL will go down in history with the Loch Ness monster as just one of those things that will never be explained. If you have any questions about our pessimistic take 21st century version of the 1980’s fully assumed UL, call or email. We can help.
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