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Why People Don’t Buy Equity Indexed Universal Life Policies? May 22, 2014

Posted by shaferfinancial in Finance.

I have been an owner of an EIUL going on 8 years and been selling them for almost 7. I tend to be surprised when people come back with the same type of rejection statement that I have heard all along. Now, when I first started selling them there was ample reason to be cautious because it was a fairly new product that had not been battle tested through poor markets. The product has now gone through the worst recession since the great depression and come out with flying colors. Worked well in multiple types of markets. Produced superior performance throughout the years.

Here are the common refrains that I hear:
The insurance companies can change the participation rates, cap rates, expenses etc.
Yes they can and I am happy they can adjust according to the market so they don’t get in trouble like the banks and Wall Street. It is for the protection of the insurers and for your protection that the insurers will be there for you. Now the facts are that no EIUL has been materially changed. The only movement has been the cap rates which, as all my clients understand, will move within a tight range as a result of interest rate movement. And remember they went through 2008-2009 and came out the same as they went in. But do choose to do business with a strong insurer.

You can lose money:
Well, if you surrender this policy in the 1st 10 years you probably would lose some money because of surrender fees and front loaded expenses. This product is not constructed for the short term. It is designed for the long term. So, as long as you hold this policy for the long term you will not lose money. The facts are that the internal rate of return for a properly designed EIUL has delivered higher returns than the index they base their payable interest rates. This is not theory but what has happened over the last 16 years that EIULs have been around.

I don’t trust insurance companies:
Do you trust banks? Wall Street? Who do you trust more? Who has done better over the long run? Bottom line is you either bury your gold in the back yard or you have to put your faith in some type of institutions.

I can do better in my companies 401K:
Facts are stubborn things and the facts are that people don’t do better in their 401ks. Not even close to the returns inside an EIUL. The reasons have been outlined in my blog so I won’t repeat them here, but if you think you will you are on a fool’s mission.

Finally, remember that when the market is in its bull run up, everyone thinks they are an investing genius, but when it goes down it does so fast and sharply creating panic in the streets. You can avoid those sleepless nights by having your money in an EIUL.



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