What Can Go Wrong With An IUL and How To Prevent It (5 DANGERS You Want To Avoid Before Is Too Late)

and uh they'll say something like well Doug I've heard you on the radio now for 15 years and so we decided you know 7 and a half years ago to take out an IL policy we put in $500,000 uh into it and now it's only worth 250,000 it's worth half of what we put in and you've been saying on the radio well another 7 and 1 half years and your cash value should have doubled that means our half a million should have been worth a million and we only have 250,000 we've lost money instead of made money uh what is wrong what can go wrong with an IL policy that's uh improperly structured and uh how to prevent it so are you understanding the difference you move from earning if you're lucky seven netting four to earning 11 and netting 10 that's huge your money doubles every 7.2 years in this episode I'm going to give you uh about five big reasons that I have noticed uh that people get disappointed because the index universal life insurance policy that they were sold or even agents who designed it it it did not perform near as well as it could so I'm Doug Andrew I been a financial strategist and retirement planning special now for five decades helping thousands of Americans optimize assets minimize taxes and Empower their authentic wealth and if you've watched very many episodes on this YouTube channel you will quickly understand that my favorite Financial vehicle without question for many long-term financial goals such as Retirement or College funding for your kids or working capital for business or Real Estate Management emergency funds and so forth is a properly structured maximum funded index universal life insurance contract now it's amazing because on this channel you will hear me talk about how I've been able to achieve for many many people uh average rates of return uh of 11.17% I've averaged since uh 1997 when indexing was first introduced 11.17 nitting cash on cash 10.07 uh there's agents that go what I've never I've never seen a policy do that what do you mean by netting see I talk about internal rate of return and uh it blows me way how many agents don't even know what that term means it means cash on cash what rate of return would you have to be earning to end up with this much cash value uh by let's say age 65 retroactive back to day one as if the insurance were coming along for the ride free now it's not nothing's free but if I can be earning a rate of return of 10.07 taxfree uh on my money I put into an IL policy to end up growing to this much money 500,000 a million or 2 million whatever at 865 uh then you have to ask well what was the gross rate of return averaging well they think it might have to be 14 or 15 no 11.17 I can gross 11 and Net 10 I can gross N9 and net 8 I can gross 14 and net 13 and a lot of Agents go Doug how do you do that well it all comes into how to structure it correctly and fund it properly and diversify and rebalance and what have you so the uh the sadus stories I hear are those that uh will sheepishly come sometimes to an event and uh they'll say something like well Doug I've heard you on the radio now for 15 years and so we decide Ed you know s and a half years ago to take out an ilul policy and uh we found out what company you uh used or companies and even the name of the products and then we we took one out with that company and and what we thought was the right product and uh we put in $500,000 uh into it and now it's only worth 250,000 it's worth half of what we put in and you've been saying on the radio well another s and a half years and your cash value should have doubled that means our half a million should have been worth a million and we only have 250,000 we've lost money instead of have made money uh what is wrong now you can't believe how many times uh this has happened and um it takes about 30 seconds and I look at it and I go oh dear who designed this for you and they go well um our nephew he had an insurance license and he said that he he could represent that company and that product and I go well he had no clue what he was doing or our brother-in-law he had an insurance Li and I go oh wow was that an expensive uh relationship it cost you well it cost you 3/4 of a million bucks yeah uh that's horrible to me so let me give you uh the five major reason on what can go wrong if an ilul policy is structured improperly okay now let's start out with the obvious there's um probably 60 70 uh insurance companies out there that offer uh decent IL products okay um but if you use the wrong company uh it's going to be very hard to get it to perform like I talk about sometime on this channel where I have averaged 11 and netted you know 10 because you're using the wrong Company the company uh introduced um index universal life and didn't really design it properly they it was a half-hearted effort or whatever so there's probably only a handful of insurance companies uh that I would recommend or put my own money into even though there's you know uh 70 80 of them out there that have products that are sort of decent but if you're using it for living benefits I get super super picky and that's why there's only maybe you know six seven or eight that I would put my own money into so using the wrong company but even if you've got the right company using the the wrong product uh with that company you got to use the right company and the right product because uh many companies will have three or four or five uh different products okay so using the wrong company or the wrong product uh is an issue but uh if you have one of the right companies and you even use the right product like some of these people said they did why did it not perform because of the third reason it was not structured correctly okay if it is not structured correctly there is no way that you can um go down the road into this policy a 7 years 10 years 15 years and and have a a gross rate of return average aing 11 and netting 10 cash on cash uh there's no way you can do it if if you have way more Insurance uh than what was required so what normally happens is novice agents they are taught to go out and just ask people so how much can you save on a monthly basis 500 a month a th000 a month and then they they Outsource whoever is running illustrations uh at the home officer with their IMO independent marketing organization can you run an illustration for somebody putting in a 500 a month and they don't even realize that they're not taking the least amount of insurance that they can get away with under IRS rules under te and defra see uh what I do is I take the least amount of insurance the IRS will let you get away with you've got to understand what guideline single premium is and be able to go into the software and squeeze down the death benefit most of these improperly structured policies have twice as much death benefit as you needed in order to be able to have it perform so what's the result well first of all you would be lucky uh to earn let's say 7% but you're netting cash on cash the internal rate of return might only be three or 4% meaning that if you grow seven you're only going to net three because there is way more Insurance there than you needed so the cost of the insurance and the fees is is gobbling up four percentage points instead of one if you you were earning seven you you ought to be able to net six so uh it's not structured correctly the next big reason if it's not funded correctly okay you want to fund it uh to the maximum level as soon as possible that's why uh most of our clients they maximum fund it to the guideline single premium uh within the first five years now maybe sometimes the people are stocking away 500 a month for 10 years it might be 10 years but um so many agents they're they're taught little cliches like uh level is the devil I just roll my eyes uh no level death benefit is the most inexpensive way to do it if you want to accumulate a lot of money especially if you're older and you're maximum funding it within five years you're going to put in a 100 Grand a year for 5 years 500,000 okay you're taking the least amount of insurance if you're 60 years old that's about a million you can Bay buy way more life insurance than a million with 500,000 that's not the objective you want the least amount of insurance you can get away with so you take the least amount and you're putting in the money as fast as the IRS allows under Tamar a lot of Agents aren't taught these parameters and so they have way more insurance by double triple what they need and it gobbles up all you know a good chunk of the rate of return so if it's not funded properly usually within 5 years most of our clients they maximum fund it to this to its limit within 5 years and by the 12th year the cash value equals or exceeds the death benefit especially if you're you know in your late 50s or early 60s to where your actual cash value equals or exceeds the death benefit so how much is the net amount at risk uh in the 12th or 15th year really zero I mean the insurance company now has the death benefit growing 5 percentage points ahead of the cash value but even whole life agents don't understand this they tout their guarantees well a whole life has guarantees we're going to keep this death benefit in force the rest of your life uh universal life index universal life you'll it'll crash and burn the insurance will get too expensive uh you know 25 30 years from now I go what you don't even know what you don't know okay uh why why would it get more expensive when your cash value value now exceeds the original death benefit you have way more than the original death benefit so the death benefit is greater than it was before uh the insurance company's only charging you for for 5 percentage points ahead of of your cash value the insurance your your cash value equals the insurance you have uh self-insured now they don't even understand what that term means and so they don't know what they don't know now I've talked about the wrong company the wrong product it not being structured correctly too much death benefit for the amount you're putting in and then not funding it in as fast as a time frame as possible usually within five years uh and and using the level death benefit the only time you should use the increasing death benefit is if you got somebody in their you know 30s a younger person and they're socking away a monthly amount of money and they plan on doing this for you know 20 or 30 years then you use the increasing death benefit only up until when until they stop putting money in when they funded it then they switch over to the level death benefit otherwise that policy will keep getting more expensive as you get older and then uh you know the the critics of of of universal life will have a Heyday saying look at that it's getting too expensive as you get older uh see the critics are pointing at the ones that are not structured correctly they're not pointing at the ones that are structural in fact they don't even understand them they're like I've never seen a policy uh where the cash value uh is grows ahead of the of the death benefit within 12 years yeah you're self-insured I put in 500,000 the death benefits a million that 500,000 doubles to a million within 7 and a half years well now there is no cost for the insurance I have I have self-insured but now the million doubles to 2 million to 4 million to 8 million it's a cash value uh why do I need a guaranteed death benefit when when the death benefit is now 8 million instead of the original million that's eight times what it was and I'm not paying for it because my cash value equals 8 million now sometimes people go what are you talking about Doug I'm talking about a property structured policy now here are the big game changers um you would be lucky to average let's say 7% and again net four if it was structured correctly you might earn seven in net six but if you understand how to diversify that with the same insurance company um if you're going through normal you know markets uh in a a yearly uh annual basis you might have uh 40% of your money in the policy allocated to a one-year pointto Point uh another 40% to a 2 year point to point and 20% to a a five-year point to point okay if you do that your average return will be like 11.3% based on actual history on any 20-year period since the Great Depression that's called diversification if the market goes down on the annual review you may switch when it's down 20 or 30% you switch to uh 50% allocated to a 5-year strategy and 50% to a two-year strategy why because you will get an average return over 14% based on actual history okay so you've got to understand those those various choices as you go through now you need to rebalance your portfolio on an annual review if your agent doesn't meet with you on an annual basis and rebalance what does rebalance mean it's it's changing the allocation but let me give you another example in March of 2020 uh covid-19 pandemic when the market dropped 30% in one single month uh my sons called their clients who had money coming up to be linked and they said link right now to a one-year Point too with no cap now you've got to have a company that offers that okay now that's normally not a a a popular choice why because uh there is no cap and some agents say well why why would you choose a No Cap all the time well because they subtract 5% uh threshold charge so if the average is 12 and they subtract five you're only netting seven if you're going to earn 12 you want to net 11 and so that's why you don't use that strategy except when the market dropped down significantly like it did March of 2020 the chance that the market was going to be up uh was very high and it was so our clients who were told to link to one year point to point with no cap one year later March of 2021 guess what they got credited the market in one year was up 66.3 3% now you subtract 5% they netted 61.3 3% one of my son's clients had $850,000 in March of 20220 without adding a dime uh he ended up with a milion 382,000 made made over $535 Grand in one year taxfree those come few and far between that's what I mean about rebalancing you're constantly rebalancing based upon what's going on you will tweak your rate of return from Seven up to an average of 11 or higher and if you structure it correctly you can earn 11 and Net 10 so are you understanding the difference by rebalancing and diversifying and structuring it correctly you move from earning if you're lucky seven netting four to earning 11 and netting 10 that's huge your money doubles every 7.2 years a half a million will grow to a million and then to 2 million then to 4 million to 8 million every 7 and a half years at at 99.6% net rate of return which is what I've averaged since 1980 so uh those are the reasons when people say Doug what can go wrong okay I shoot straight wrong company wrong product it's not structured correctly it's not funded properly you didn't diversify and meet on an annual basis and you did not rebalance your portfolio and so unfortunately I can't do anything about it you've got to make sure you have the right advisor helping you that has taken the time to learn how to do this right that's why I developed IL insiders to train ilul professionals how to do what I just explained so if you're a professional uh check out ilul insiders uh.com join and pass a proficiency exam to prove that you know what you're doing if you're remember the general public you can read this book and know more than 99% of I agents know about how to do what I've just been talking about so this is a 300 page book that's been flying off of our warehouse shelves we send out a couple of thousand of these every month and uh you will know more than most agents do when you study this book it's actually two books and one this side is about 200 Pages 14 chapters with all the charts and graphs and explanations if you're a left brain learner if you're a right brain learner you flip it over to this one about 100 Pages 12 chapters with 62 actual client stories right brain left brain but you simply go to laser fund.com or click on the link below you contribute a nominal amount towards the shipping and handling I'll cover the rest of that cost and I'll pay for the book I will fire out a hard copy to you via priority mail you don't have to go to Amazon and pay 20 bucks if you do thank you but I'll pay for the book now when you're in there claim your free copy you can get a book bundle this is my other bestseller in ttan abolition they go hand inand uh it talks about the three dimensions but uh you can also um invest in master classes if you'd like to listen and learn watch and learn uh we have educational webinars that are free we do on a regular basis register for some of those but you can even schedule an appointment online to meet with an ilul professional that's been certified passed a proficiency exam so you know for sure they know how to do it correctly and then you can see how it how these strategies work in your particular set of circumstances with no cost or obligation if you say thanks but no thanks they will not bill or invoice you is that fair enough so start now to take uh control of your brighter future make sure if you're checking this out that it's done [Music] properly

As found on YouTube

Learn More