Uncommon Financial Wisdom

One of the most popular post on this blog is the post on equity indexed universal life insurance policies (EIUL).  I think that life insurance sales folks are really pushing these policies.  Unfortunately, there is much misinformation on these financial instruments because the great majority of insurance sales people don’t have the finance background to really understand how they work nor do are they worried about their clients wealth creation.  I will keep this post short.  Here are 5 things everyone should know before they purchase an EIUL.

1.  They are for long term planning only.  There are substantial fees included in them that need a minimum of 10 years to overcome;

2. They are extremely unlikely to give you anywhere near double digit returns.  Once again the fees and the insurance costs eat into the returns so you can always get better returns investing directly into the market (not necessarily with mutual funds which have their own return reducing issues).  So the real reason for having an EIUL is to legally avoid taxes and to have a place to put your wealth that will appreciate well beyond inflation rates. 

3. When structured right, you can minimize the fees and maximize the cash value.  But most insurance agents either don’t know how to structure them in this way or won’t because they are trying to maximize their commissions;

4. EIULs are great complements to wealth creating activities.  But, they shouldn’t be the only savings/investing tool you are involved in; and

5. There are many moving parts in these products that have the potential to effect your returns.  Find a company that have a history of not making changes to their products once launched.  Also make sure the policy is from a top rated company. 
 

Hope this helps.  Contact me if you are interested in an EIUL.  I sell them in most states.  And I will always give you honest answers to your questions!