IUL

— Last year, Busch [Kyle Busch] initiated a lawsuit […] over several contracts he bought from them for indexed universal life insurance, known as IUL. According to reports of his filing by InsuranceNewsNet and others, he claimed predatory marketing techniques because he thought he was buying a retirement savings investment, but the results didn’t live up to what was promised. They settled in March for $8.5 million. […] “IULs are not inherently bad, but it’s misrepresented, sometimes fraudulently,” said Bill Boersma, a life-insurance expert who consulted on Busch’s case. The root of the problem was treating life insurance like a retirement savings vehicle. Social-media posts are full of praise for IUL, often from paid influencers who are part of multilevel marketing-type arrangements, Boersma said. They often promise high, tax-free returns with no strings attached, while they “put down traditional investments like 401(k)s” […] IUL is a kind of permanent insurance that works differently than the type of “term” life-insurance contracts people may be more familiar with […] Indexed universal life, on the other hand, typically has the buyer pay in a lump sum to start for a death benefit that can fluctuate. Along the way, the funds accumulate a cash value, pegged to an index like the S&P 500 SPX — but not actually invested in the market in your account — which you can borrow against. […] “IUL has a great story: you capture the upside of the market without downside risk,” said Boersma. “That’s the marketing pitch. The problem is it’s not real. You don’t really get the upside. Your money’s not really in the market.” […] “People borrow for years, and then get a 1099 for phantom gains that’s in the seven figures,” said Boersma. “They say, ‘What the heck? I never sold anything.’”