According to “17 Bizarre Moments From History”[i] this 1923 invention called the “Portable Baby Cage” allowed the modern mother a chance to provide their babies fresh air and sunshine even though she couldn’t get outside.
It is reported that future First Lady, Eleanor Roosevelt bought into this fad and purchased a cage for her daughter Anna. “Shockingly, a neighbor threatened to call child services.”[ii]
Today the newest fad in life insurance is Indexed Universal Life (aka IUL or EIUL) for the modern individual. In a moment I’ll tell you about a recent ride in my pickup that will reveal something to you about this fad.
There are people that call our office enthralled over the fact that they own an IUL life insurance policy just like some famous person or celebrity. But simply because a celebrity or famous person owns an IUL doesn’t mean you have to make the same mistake they are making.
Einstein is reported to have said that “two things are infinite: the universe and human stupidity; and I’m not sure about the universe.”
ONE important thing to remember is that most famous people and celebrities may have much more money that they can afford to lose without suffering compared to you or I. So it makes good sense to be smart and think through how an IUL policy really works.
IUL polices have a very minimal guaranteed rate of return. Usually 1%-2%. They also have annual premium fees, typically between 4% and 6%. Then they cap your ability to earn the higher returns of the Index they are tracking, most commonly around 11% to 12%.
On top of this, the expenses for the IUL block of business can be altered so that the expenses that you pay, out of your accumulated cash values, can rise significantly over time.
All of this means that the guaranteed rate of return can disappear, and you can experience a net loss instead of a guaranteed gain.
Now about my pickup. The other day we were traveling down the road and switched on the gas mileage computer. The results were fascinating.
Our Toyota Tundra averages 15.1 miles per gallon and it has done this consistently since the day we purchased it. Today we have nearly 26,000 miles on this vehicle, but as we were traveling down the Interstate this fine spring day our gas mileage computer was showing that we were getting 18, 23, 55 and even 99 miles per gallon!
Wow! Now I can boast that my pickup gets 99 miles per gallon! And although that would be truthful it would also be very misleading. In fact, it would be very similar to showing a prospect an IUL assumed values projection based on assumed returns without showing the risk the owner of the IUL assumes because expenses will rise to become greater than the guarantees 100% of the time in an IUL policy.
We all know that babies don’t need a “Baby Cage” to get fresh air and sunshine. And you don’t need an IUL to get the value you require from a life insurance policy.
What you need to secure value in a life insurance product is to own participating whole life insurance (PWLI). PWLI gives you solid guarantees and level premiums that can’t be taken away or increased at a later date. On top of that, PWLI gives you the opportunity to take part in the profits of the insurance company.
As insurance companies are known for their fantastic ability to manage risk, being a participant in the profits that come from avoiding risk becomes very significant and only PWLI ownership allows you the opportunity to benefit from these profits.
Fads come and go. Some are harmless, but it’s pretty obvious that saying NO to “Baby Cages” and NO to IUL’s is simply good sense that can save you money. It’s just that simple.