Is IUL a Scam? Yes.

I won’t bury the lead. If you invest $200/month for 40 years, this is how much you’ll end up with.

  • In an Indexed Universal Life (IUL) insurance policy: $320,701
  • In an index fund: $1,797,311

An IUL policy is likely to erode 82% of your wealth compared to investing directly in an index fund. How do I know this? Because I bought one, read every page of the policy, and did the math.

I have been seeing a rash of insurance salesmen on social media representing their insurance products as investments. They ignore the death benefit (the insurance part of an IUL insurance policy) and instead talk about the amazing compound growth, tax benefits, unlimited banking, retirement income, etc.

After seeing these social media posts, I clicked on one of their links in bio and set up a meeting. I was on two different zoom sales calls that lasted about 90 minutes in total. I recorded them in their entirety. They pitched me the product, I gave them all my info, and I bought it. For what it’s worth, the policy I bought was through World Financial Group (WFG) which is an insurance MLM and they sold me an Transamerica policy. The policy I purchased is typical of every other one I have ever seen.

Below I’ll detail the lies they told, and the truth behind the math.

Lie #1: They Ignore The Existence of Dividends

Pretty much every IUL pitch you’ll see eventually will have a chart like the one below. This came directly from the policy I purchased.

YearS&P 500 Index IUL 0.75% Floor and 13.75% cap
2002-23.37%0.75%
200326.38%13.75%
20048.99%8.99%
20054.69%4.69%
200611.65%11.65%
20073.65%3.65%
2008-38.49%0.75%
200923.45%13.75%
201012.78%12.78%
20111.54%1.54%
201211.68%11.68%
201329.60%13.75%
201411.39%11.39%
2015-0.73%0.75%
201610.46%10.46%
201719.40%13.75%
2018-7.01%0.75%
201928.88%13.75%
202016.26%13.75%
202126.89%13.75%
20 Year Average7.38%8.67%
Chart from an IUL policy that ignores the existence of dividends paid by the S&P 500

Upon first glance, this makes the IUL look pretty good. No downside risk, higher overall return. As far as investing goes, those are both good things. But with all good cons, there’s a morsel of truth hidden in the big lie. IULs always compare their “index interest” to the change in share price of the index, but they ignore dividends. i.e. If you buy an index fund you don’t get the 7.38% return shown on the left. You get that return PLUS all of the dividends paid to you in cash (which can then be reinvested to amplify your total growth). Here’s the same chart with a third column showing the actual total r