Indexed Universal Life: The Dangerous Truth About IUL’s for Infinite Banking

If you're considering using an IUL policy for privatized banking (be your own banker), I want you to watch this video first. We will discuss indexed universal life vs whole life.

While an IUL can work, I want to outline why "infinite banking universal life" do not go together.

The father of Infinite Banking himself, Nelson Nash, said there was only one type of policy for this concept.

Whole life insurance with high cash value that pays dividends, with a mutual company.

The reason: you need guarantees. A guaranteed premium, guaranteed cash value dollar amount, and a guaranteed death benefit, and that's what a whole life policy delivers.

However, indexed universal life is trying to take advantage of the growth in the market without loss.

That's at least the assumption and the perception that's communicated when you hear upside potential and downside protection.

But here's what's happening within an IUL policy.

First, you pay your premiums. It's called a flexible premium, meaning that you can pay late or you can pay less, or you can pay not at all, and the policy is still supposed to work out for you.

The premium dollars go to pay your costs.

One of those costs is annually-renewable term insurance. With annually-renewable term insurance, you have an increasing cost of insurance every year as you age and get more expensive to insure.

So you have this rising cost inside the policy. Flat premiums, rising cost, means less premium dollars are left over at the end of that premium payment period.

The premiums leftover go over into the cash value component, which grows then at a rate of return that's associated with an index. That index is usually the S&P 500, but it can be another index as well.

If the index performs well, you'll earn a high interest rate, and if the index performs poorly or even drops in value, you'll have a floor, which means that you can't go negative in your crediting rate.

How does it apply to those guarantees we talked about in whole life insurance?

First, let's talk about the premiums. The premium inside of an IUL policy is not guaranteed. What do I mean by that? Well, an IUL policy shows that you have a premium due every single year, and they show that not increasing.

It sounds attractive that I can pay less or different than what's illustrated.

However, the insurance company also has the right to change premiums and not always in my favor.

They can raise premiums above what's illustrated, meaning that if I've committed to paying $30,000 per year to keep this policy in force, the policy still may require additional premiums to fulfill that commitment.

The reason is the rising internal costs in the policy.

If and when the premiums become inefficient to pay that rising cost of insurance, the cash value is your stopgap or the second source of paying for that cost of insurance.

If the cash value has grown sufficiently because you've hit the cap crediting rate every single year, you're probably good to go. But we can't guarantee that the market will perform that well (It's never happened).

If you perform at a mediocre level, you probably still will not have enough cash value.

Certainly, if you are coming down to the floor or a minimum crediting rate of maybe zero to 2%, you are not going to have sufficient cash value to cover those internal costs. Which means there's nothing to support the death benefit.

In that case, you don't have a life insurance policy.

If that happens, you need to pay additional premiums to keep this policy in force, or you're going to have to surrender the policy.

That's not where you want to be, especially in the later years of your policy like your 60s, 70s, and 80s when you are closer to the timeframe of needing it to pay out to your beneficiaries.

You also don't have a guaranteed cash value dollar amount.

Inside an IUL policy, yes, indeed you have a guaranteed minimum crediting rate. But if the minimum crediting rate is zero, your cash value isn't growing. If it's 2%, but your internal costs are 2 1/2%, your net growth rate is negative .5%.

You can go backward and lose money in your cash value.

A policy that I cannot count on paying out a death benefit is certainly not a policy that is compatible with privatized banking.

With infinite banking, you get predictable values in the future. Sure, they might be lower because you're not attached to the market, but having guarantees is much more valuable to your financial future.

#indexeduniversallife #lifeinsurance #indexeduniversallifeinsurance #iul

[payloadperformance]

i’ve had an IUL for 4 years and i’ve never gone below 7% a single month, highest has been 11.8%
it really depends on how it’s structured.
a whole life typically can guarantee but at 2-3% which doesn’t even keep up with inflation, so you’re essentially guaranteed to have your money locked away and not make anything.
i know because i used to have a whole life, i made ZERO on it and when i switched over to a IUL within the first 3 years i saw money growing with interest better than what i expected.

[berkissalcedo]

Thank you Rachel for this valuable information because it helps me clarify before I switch my whole life insurance into a IUL. I will keep my Whole Life Insurance.

[Unplugged]

This is a very good video. And like many that I see in YT, they all (including you) state …”if structured properly.” But not one video shows or illustrate how/what “structured properly” is supposed to be.

So..may I ask that you do a continuation video on how to structure IULs properly, with complete illustrations and charts?

That would be so helpful and easy to understand.

Thank you!

[TheBLACKboard]

VERY helpful! Thanks! Had just heard of IUL's as a possible investment strategy. Yours is one of 3 videos I watched. Yours is definitely the most comprehensive!!

[Mezcaudill]

This is good information. I started researching IULs after seeing several people on TikTok talk about them very positively. Needless to say they are all agents trying to get more customers so I wanted to get a less rose tinted view of them. The more information the better. I have a lot more research to do but this video helps paint a more realistic picture of what can be expected

[CourtneyHill-Digitalcreator]

I am considering an IUL and I always try to look at both sides to getting educated before making a decision. Thanks for this video outlining what could happen.

[MrMarkovka]

Thanks for the info. Would you be willing to show us how you set up your personal WL policy? I think that would clear up a lot of confusion ppl seem to have.

[joshuafootman]

I would encourage you to follow David McKnight who wrote the book power of Zero and helps break down the power of an IUL.

[HGarach]

Wow!! You are so Awesome!!! 😘❤️ Love how you explain things!! Wish I would have watched this video before becoming an IUL agent last week.

[Imagine-biz]

Annual Renewable Term cost is only when selecting Option B (Increasing). To control the COI, especially in later years, use Option A (Level) where the COI is fixed the insurance is essentially decreasing term. Also, dividends are not guaranteed... You can't have it both ways. Also, keep in mind that life insurance dividends are a "partial return of a deliberate overcharge".

[renesoulet]

Look into becoming a Fiduciary agent who educates clients on all types of insurance. GOOD and BAD POINTS. Then let the client decide which one they think is best for them instead of selling them something because that is all you offer.

[Googlishful]

You nailed it; the TRUTH on the IUL's ... I'm an agent and have lots of suspicion on how these are designed and sold. We should talk at some point! Thanks.

[Allenballen]

Definitely valid concerns although that really depends on the agent and how they structured the policy. Check out Doug Andrews and his videos on if the agent is proficient enough to structure an iul policy

[chineduezetah]

I really appreciate your insight on IUL. So much knowledge and understanding in 6 minutes, that i am looking forward to whatelse i can learn from your channel. Can't thank you enough 🙏🙂

[leeyost]

Not to mention an agent makes more commissions off the whole life but if you are doing unto others as you’d have them do to you that shouldn’t be a reason you’d recommend one over the other and scare people. My husband has over 20 years in the business and I have 10. The reason I came on board is because his long time clients love him and what he’s done for them. Some have cried and thanked him Over and over and that’s what I want out of a “job”! ♥️

[RetirementPlanningEducation]

GREAT video, thank you! I agree with your approach on this...it's not that IUL's CAN'T perform as initially projected, but there are many ways and and reasons in which they can fall far short of expectations (which means the client has to decide to either let it lapse, surrender it or pump in more cash than they thought they'd have to)

[jonathanratliff]

The mutual life insurer for which I have been a career agent does not offer IUL, also forbids us to broker an IUL. If we are found out selling an IUL we could lose our agent contract with the company they are that opposed to it. Now if departments of insurance will have illustrations requirements to be much more clear to the consumer my company said they may consider it but current consumer illustration requirements are not specific enough.

[thomasmurphy]

The IUL policy table I received gave a $200 monthly (combined) payment, but did not break the $200 into its components: life insurance (cost) and whatever was left over for the Index investment. And, at some point the value goes down whereas the associated table notes say that unless the individual makes additional payment amount in the premium the insurance payout isn't possible.

[anizedergham]

The best explanation I have ever heard of a ul

[MrArrizon]

Been in the insurance game for 17yrs and till this date I still haven’t seen a “properly structured iul “