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Indexed Universal Life: The Dangerous Truth About IUL鈥檚 for Infinite Banking - YouTube
Channel: The Money Advantage
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let's talk about the risks of an eye ul
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policy now if you're considering using
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an eye ul policy for privatized banking
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I really want you to watch this video
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first because I want to outline the
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risks of an eye ul policy that make it
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incompatible with privatized banking now
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first of all if we go back to the father
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of infinite banking himself Nelson Nash
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he said there's only one type of policy
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that can be used for this concept and
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that's really whole life insurance with
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a high cash value that pays dividend so
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it's with a mutual company now the
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reason for that is that you need
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guarantees you need a guaranteed premium
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guaranteed cash value dollar amount and
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a guaranteed death benefit and that's
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what a whole life policy delivers
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however iul-s are this policy that is
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called index universal life and what
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happens is they're trying to take
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advantage of the growth in the market
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with having no loss that's at least the
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assumption and the perception that's
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communicated when you hear upside
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potential and downside protection but
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here's what's happening within an eye ul
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policy first you pay your premiums which
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are a set or a fixed dollar amount of
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premium it's called a flexible premium
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meaning that you can pay late or you can
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pay less or you can pay not at all and
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the policy's still supposed to work out
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for you then the premium dollars go to
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pay your costs now one of those costs is
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annually renewable term insurance or the
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cost of insurance associated with that
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and with annually renewable turn
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insurance you have an increasing cost of
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insurance every year as you age and get
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more expensive to insure so you have
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this rising cost inside the policy flat
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premiums rising cost means less premium
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dollars are left over at the end of that
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premium payment period so the premiums
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left over go over into the cash value
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component which grows then at a rate of
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return that's associated with an index
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that index is usually the S&P 500 but it
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can be another index as well and what
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happens is if the index performs really
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well you'll have a high crediting rate
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or interest rate inside the policy and
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if the index performs poorly or even
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drops in value you'll have a floor which
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means that hey I can't go negative in my
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crediting rate now that
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a little bit of background information
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about the IUL policy how does it apply
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to those guarantees we talked about in
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whole life insurance first let's talk
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about the premiums the premium inside an
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IU L policy is actually not guaranteed
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what do I mean by that
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well an IU L policy shows that you have
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premium do every single year and they
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show that not increasing it sounds
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attractive that I can pay less or
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differently than what's Illustrated
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however the insurance company also has
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the right to change premiums and not
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always in my favorite they can raise
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premiums above what's Illustrated
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meaning that if I've committed to pay
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thirty thousand dollars per year to keep
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this policy in force and I'm depending
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on this policy to be there for me and
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I'm depending on the cash value
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increasing and I'm depending on the
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death benefit paying out as the
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permanent policy it claims to be the
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policy still may require additional
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premiums in order to fulfill that
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commitment to reason is that when I have
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these rising internal costs in the
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policy what is supposed to happen is if
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and when the premiums become
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insufficient to pay that rising cost of
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insurance the cash value is your stopgap
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or the second source of pain for that
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cost of insurance now if the cash value
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has grown sufficiently because you've
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maxed out and hit that cap crediting
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rate every single year you're probably
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good to go but we can't guarantee that
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the market will perform that well and if
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you perform at a mediocre level you
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probably still will not have enough cash
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value to cover and certainly if you are
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coming down to the floor or a minimum
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crediting rate of maybe zero to two
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percent which is usually what's built
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into an IU a policy you are not going to
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have sufficient cash value accumulation
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to cover those internal costs which
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means there's nothing to support the
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death benefit in that case you don't
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have a life insurance policy now if that
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happens the life insurance company can
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come back to you and say hey here you
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need to pay additional premiums in order
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to keep this policy in force or you're
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gonna have to surrender the policy and
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when you're stuck between a rock and a
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hard place that's not where you want to
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be especially in the later years of your
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policy like your 60s 70s and 80s when
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you are more likely to need to use that
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benefit and you're closer to the
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timeframe of needing it to payout to
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your beneficiaries
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now you also don't have a guaranteed
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cash value dollar amount now inside an
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eye ul policy yes certainly you have a
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guaranteed minimum crediting rate but
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it's a minim but if the minimum
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accrediting rate is zero your cash value
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isn't growing if it's 2% but your
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internal costs are two and a half
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percent your net growth rate is actually
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negative point five percent so you can
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actually go backwards and lose money in
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your cash value and if your cash value
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has shrunk and is miniscule no amount of
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a minimum crediting rate gives me peace
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of mind of knowing that I'm gonna have
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money available in the future really we
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need a guaranteed cash value dollar
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amount the last piece is that we need a
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guaranteed death benefit now if I'm in a
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policy that I'm not even sure that I can
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count on being there for me and paying
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out a death benefit that is certainly
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not a guaranteed death benefit I mean I
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might have to cough up additional
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capital just to make this thing perform
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well for me so when I look at an eye ul
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policy I see watery promises I see the
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inability for this policy to provide
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certainty and guarantees and that is not
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a policy that is compatible with
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privatized Banking with privatized
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banking you need that firm foundation
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that solid ground you can stand on so
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you know the predictable values in the
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future and sure they might be lower
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because you're not attached to the
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market but however having guarantees is
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much more valuable to your financial
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future hey I hope you like this video if
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you did click the link in the
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description box below for more
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information and don't forget to like
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