Equity Indexed Universal Life - Typically a Bad Idea
With the decline in the major stock market indexes, many life insurance agents are now urging their customers to buy Equity Indexed Universal Life Policies, or EIUL's. These policies have a life insurance component that pays a benefit when you die plus an investment component which usually earns a portion of the gains of a particular index or, if the index declines, a minimal guaranteed return of approximately two percent.
The first thing any consumer should know about EIUL's is that they are complicated. Some salespeople use this fact to their advantage by "simplifying" the product, describing it in a way that is either intentionally or unintentionally misleading. In the past, customers of these and similar products have complained that the products were not fully explained to them. In other situations, customers have reported that the products were not suitable for them given their objectives.
Even when properly explained, these policies are usually a bad idea for a number of reasons. First, they are typically loaded with extremely high investment costs that drag down the performance or a potential performance of your return. On the insurance side, comparable amounts of insurance coverage can usually be obtained more cheaply through other, more traditional policies such as term or whole life policies. Looked at another way, the purchaser of an EIUL pays so much in investment expenses that they cannot afford to purchase the amount of life insurance coverage they actually need.
The combined effect of high investment expenses and expensive insurance benefits is a bad combination in the case of EIUL's.
Generally speaking, it is much less expensive to buy investments and life insurance separately.
Page Perry, LLC and its attorneys has experience representing investors in arbitrations and in court in cases dealing with securities and investment management firms. The firm has over 125 years of collective experience representing investors in investment-related litigation and arbitration. For further information, please contact us.
