9-Year IUL Case Study: What Went Wrong and How to Fix It

Hello and welcome. My name is Denzel Rodriguez, your personal finance geek of the 21st century. And in today's video we're going to be looking at a nine year old index universal life insurance policy. A real case study, real numbers, real situation. When you're on the Internet trying to learn about whether it's the infinite banking concept, infant banking strategies and using life insurance to fund to create passive income or fixed income or income in retirement, tax free income, earn a higher rate of return than your 401k, than a investment account to some sort, it's very difficult to actually find real case studies. Well, on this channel I like to always present real numbers, real case studies so we can learn from this together. Unbiased approach, right? I'm just going to give you the facts, I'm not going to inject my opinions and if and when I inject an opinion on this particular case study, I will let you know. And then what we can do is have a dialogue in the comments so we can all learn how we can improve from this particular situation. When you're deciding on whether you should fund an index universal life insurance policy or a whole life insurance policy for let's say infinite banking strategy or if it's just a matter of saving money in a life insurance contract for the sake of all the benefits that come with life insurance. So with that being said, I'm going to be sharing my screen going back and forth, I'm going to go nice and slow and feel free to pause, feel free to comment. If I say anything incorrectly, please also let me know, especially if you're a well versed insurance agent in the, in the business. So let's dive right into this. Here we have on the board a female, currently I'm in 2025, March 21st, recording this video. This person is now 53 years old. This policy was issued in 2015 with an issue age of 44. The rating that she got was Preferred Elite, which is pretty much the best rating that you can get. The company that we're looking at is Transamerica. The type of product is an index universal life insurance policy which is a flexible premium adjustable policy with an index option.

Okay.

The death benefit minimum is $100,000. We have a death benefit option called increasing. So as you fund this policy, the death benefit is supposed to increase over time. 121,000 is what it's starting out as. And there's a rider, a long term care rider provision on this policy. So those are the main details of this IUL now looking over on the left hand side of the board is the policy design. This is the breakdown of how these numbers actually play out. So what the client was illustrated was her contributing $140 a month for the rest of her life until she passes away. That's the design. $140 a month. That number comes out to $1,680 on an annual basis. Let me explain these three numbers right here. We got target Premium. We have guideline Premium, also known as 7 pay premium. And then we have a no lapse premium premium. These are three very important numbers when you are looking into funding an iul. Most of the time, here's my opinion. And also this opinion is based off of an experience I've had talking to agents that sell iul. So this is personal experience. And this is also experience coming from my clients who have purchased IUL 100% of the time in my experience and working with clients who have purchased IULs do not understand those three numbers. That's first and foremost. Second, they were not informed of these three numbers, 2 and 3. They do not understand the implications. They do not fund up to those certain numbers. Those are three things. That's an opinion. Maybe you're watching who have an IUL can genuinely tell me what those three things mean for your iul. And I'd like you to put that in the comments if you know exactly what they mean. So I'm going to share with you an idea, general idea here. When you're looking at the target premium of an iul, this is the number that we could say that you should be paying into your life insurance policy on an annual basis. That number is $1,733.45. That's the target premium for. We could say, and this is where I'm throwing opinions here, right, that your policy would be, say, optimal if you paid in $1,733.45 in a year. Next is your seven pay premium, also known as when you're looking at the illustration, it might say guideline Premium. This is your MEC limit on an annual basis. So this is MEC Modified Endowment contract on an annual basis, meaning you cannot pay in more than $4,917.39 in a year for the first seven years of this IUL contract.

Okay?

So what I would say here is if you funded this IUL according to the guideline premium of $4,917.39, then you are maximizing policy performance. You are maximizing success of the policy. And then we have what's called the no lapse premium, meaning as long as you pay in at least this amount per year, your policy will not lapse for a period of time. And that period will be different for every policy, I think. Okay, another opinion there. That number is $1,314.36. As long as this person pays in this amount, their policy won't last. Now, let me show you what they've done over the last nine years. Without missing a beat. They've paid $140 like clockwork, on a monthly basis every single year at $1,680 a year. So what they have done, what we can say here is at 1680, minus the no lapse premium number, they funded $365.64 above no lapse, but they funded. If we look at the target premium, they funded $53.45 below optimal, if that's an appropriate word I can use here. So they funded their policy below optimal levels for the last nine years.

Okay.

Which has now resulted with the current cash value as of January is the last statement that I got. Let me now share my screen to give you the proof so that we're all on the same page here without sharing the person's information, without putting their name out there. As you can see, Transamerica Financial Foundation IUL Specified Amount 100 Grand Death Benefit Option increasing financial values. As of January 17, 2025, we have a cash value of $5,098.09 with a surrender value of 3,298. 09. If you don't know what surrender means, that just simply means if this person was to cancel their life insurance policy, they would get $3,244.31 in year nine of their policy. So if they paid in 1680 times nine years, they've paid in $15,120. And if they surrendered their policy today, they would only get $3,244.31. That's an $11,875.69 loss for this mom 53 years old today, when we're about maybe 10 years or less out from retirement. Okay, so not good so far from okay. This is an opinion, right? I'm saying that's not good, right? That's not healthy. I don't like that. That would put me in a state of fear, doubt and uncertainty. If I'm a single mom of 53 years old operating in the United States and my financial education is not you know, at a level where I can comprehend what's been happening the last nine years. So when this person became a client, started working with me, before I inject my opinions, my goal is to figure out how much does she know about this asset that she purchased nine years ago. Her level was almost zero. Like we just, just didn't know what we were buying. And I think a lot of people watching, those of you that are watching this video are in that same position. You, you really don't know what you bought. And if I asked you and gave you a little bit of a quiz, that would reveal a lot in a short period of time. So I think that's what we're discovering here. And some of my key points I want to highlight in the middle here based on this case study is there's clearly a lack of education. We have a lack of performance of the policy itself. This over promised and under delivered. And we have a poor policy design because this person didn't know what they didn't know about the policy. Now I could make a strong argument that if they would have funded above optimal levels, that the policy would have potentially performed better. And so they were misrepresented. An illustration according to this number of $1,680. If we look at the actual original illustration. Here we go. I'm going to share my screen one more time again without compromising this person's information. If you look at this design, this look like the policy would perform a certain way according to what we call the guaranteed assumptions. Okay, so right now what you're seeing is if this person pays for the policy, $1,680 a year, and we look at year nine paid in 15,120, the guaranteed cash value amount is $4,614 with a surrender value of $1,648 with a death benefit of $126,089. So according to the guaranteed assumptions of this policy, and when looking at how her policy actually performed, coming back to the whiteboard, we can see here how her cash value did perform better than the guarantees. So that's nice. It performed better than what it was guaranteed to do. Now let's take a look at what we call the non guaranteed assumptions, which is what opinion. Which is what most IUL agents will direct their client to look at. They don't have them look at the guarantees. Typically, this was an experience I went through with different IUL agents that I've spoken to, especially if I was on a three way Call with my client going through the process as their financial coach. Here's what the policy should have done. If I paid in $1,680 over the last nine years, paid in 15,120, I should have about $11,145 with a surrender value of 8,179 with a total death benefit of $132,620. The non guaranteed assumption, right, assumes that this policy is going to go nowhere but north in terms of your rate of return and every single year for the next nine years. Well, that's not what happened. When you look at the market from 2015 all the way to 2025, was every year an up year? Not necessarily. Okay. Not only that, you do have internal fees and expenses inside of this IUL that's going to cause a drag on the performance, as we've seen. So we missed out on the potential of having $11,760 if you would have compared this to a simple savings account. Now, granted, no death benefit, but if this person would have just saved $1,680 at anywhere between 2 and 4%, they would have had more than what we currently have right now under the cash value of $5098.09. So that frustrates any client, any person that is funding a life insurance policy thinking they're going to get something according to the illustration, ends up not being the case. So when you're being presented an illustration for life insurance, there's three different categories. There's the guaranteed assumptions, which is like, hey, no matter what happens, this is what your policy is going to perform. Then there's the non guaranteed assumptions. This is what your policy is likely to do, but not guaranteed. And then there's something called midpoint assumption, where it's like, your policy should at least do this. This is in the middle of guaranteed and non guaranteed midpoint. So if we look at years 2015 to 2025 according to the stock market, because an IUL follows the stock market, you mean to tell me that my policy couldn't at least do the midpoint assumptions? Well, let's look. Let's see what the midpoint assumptions are. Again, I'm going to, I'm going to zero on in without sharing the person's name and information and all that good stuff. So let me just scroll to it first without compromising this person's info. So watch this. We have non guaranteed assumption midpoint 1680, 15,120 paid in according to the midpoint assumption, now with most Iuls that I've seen, midpoint is like maybe a 3 or 4% return. And if we're looking at Iuls today, written in 2025, they can only illustrate around 6%, maybe 6.5, if that. So the midpoint of 6, 6.5 would be like 3, 3 and a half, 4. So if we assume that same number around here, my policy should be at about $7,432 with a cash surrender value of 4,466 with a death benefit of 128. Again, if we come back to the whiteboard here, that's not the case. That's not what, that isn't just what happened. We have a cash value of 5,909 with a cash surrender value of 3,244. 31. And I wrote the midpoint assumptions right here, the assumptions and the guarantee. So it performed better than the guarantee, but it underperformed by thousands of dollars below the assumptions and also below the midpoint. So this, this, this person would have been better off literally just sticking their money in a savings account, in a high yield savings, and it would have outperformed this all day, every day over the next nine years. Now, granted, with a savings account, you don't get a death benefit. So maybe a better comparison could be looking at a whole life insurance contract. Or you could do the comparison of what a lot of content creators do is they'll take that 1680 and they'll say, okay, how much death benefit can I get of term insurance at 100 grand. And whatever that amount is, we would Pay that amount, $20, $50 a month, whatever it is, and then invest the difference or even you could argue saved a difference.

Right?

You would have had the benefits of life insurance by purchasing term or convertible term with living benefits and saved or invested the difference of that 1680. And nine years later, you'd have all the benefits of life insurance, no cash value, and you'd have more money in that investment account, more money in that savings account. For this mom here, at 53 years old, she would be closer, better off financially, more financially secure than had she purchased this IUL. She's essentially lost out of the 15,120 minus from 5K, she's lost about 10,000. Again, granted there is a death benefit there still, so that has value. But if we're just focusing on performance, this has greatly underperformed. And I believe the reasons for that is lack of education, lack of performance on the insurance company transamerica but also poor policy design. Had the agent shrunk the MEC a little bit more, that would have resulted in lesser fees, lesser cost, lesser drag. I would, I would argue on the performance of this and really just optimizing the 1680, because that's what was illustrated on this policy is just paying in 1680 a year for the rest of your life. And here's how it should perform. But the reality is that this policy could have performed better if she knew that she could pay in more money. So that would be my defense, so to speak, for having this IUL is, well, if they would have known that they could pay in more than the target premium up to the Mac, that they probably would have earned more money tax free in this account and probably would have performed better. But again, that's an assumption. There's no guarantee that that would have happened.

Okay.

And you would have had more insurance expense because your death benefit would have been higher over the next nine years. Okay. So there's a lot here to unpack. But what I want to really get at here is the, the different things that this person could have done. And again, helping you really make a decision. If you're sitting with an IUL agent today, you want to ask them these, these questions about actual performance versus assumption. So if you get an IUL agent showing you an illustration of how your policy could perform, three main numbers you want to look at. What's my target premium? What's my no lapse premium? What's my 7 pay premium or guideline premium, and how are they illustrating you funding this policy? So for example, if we use this number here, if they're only showing you paying in 1680, but you could pay in more, why not just show the more number being paid in? Show that and let's see what that could perform at. Because that means that for the 491739 or 4504 grant, whatever it is like now we're showing maximum optimal potential success and performance according to that design with the death benefit and the surrender values and the fees, all of that have your agent show you that instead, not a lesser amount being funded for the sake of whatever. I don't know what the reason are for that. The next thing that you want to ask your agent and I do a lot of collaborative work with other insurance agents and I was given this list of questions, right. To ask your agent questions to ask. It's a lot. There are 12 questions, okay. That if you want me to email this to you directly Just reach out. I have links below. I got my website below where you can contact me. You can ask for this directly. I'll name a few for for this video. But that would be one of my most important questions there. Those three numbers, target premium, guideline premium, no lapse premium. And also ask the agent, do you have actual performance? Could you show me a real in force IUL with the company that you're showing me of someone that paid into their policy and it performed according to the illustration? Did it outperform the illustration? Did it underperform the illustration or did it perform according to the illustration? This is, I'm giving you 2015 to 2025, almost 10 years of an IUL and we can see that it didn't perform well and it was underfunded. You can make arguments that Weldonzell because it was underfunded, it didn't perform well. I got you. But why did it not even perform according to the midpoint assumption? It fell way below that. What's the purpose of that? I believe policy design, poor structuring, that they created too much mec space which creates too much insurance expense to support only 1,680 going into the policy. So it ruins it. Now if you would have compared that 1680 to a whole life guaranteed to guaranteed performance, a whole life is going to outperform an IUL on the guarantee levels all day every day of the week, all day every day. Then you tack on the non guaranteed assumptions of a whole life insurance contract which has a track record of working with a mutually held life insurance company where the guarantees, where the dividends, the non guaranteed assumptions have been paid over 100 years straight. They never missed a beat. Companies like Guardian, New York Life and a few others.

Right.

Massmutual, you got who else you got lafayette, you've got Ameritas One America. We've got these companies here that have the track record of paying dividend. So if you looked at the guaranteed rate of a whole life insurance contract in 2015, most of them were paying 4% guaranteed. And then obviously you take away fees and costs, your internal net rate of return maybe 1%, 2% negative in the first few years, obviously. But once we get to years 4, 5 and 6, we're positive 2. And then you get to years 7, 8, 9, we're now internal net rate of return between 3, almost 4%. Okay. If it's properly structured, if you just looked at that 1680, that would have performed better than this IUL right now, I'm not saying that this person should get a whole life. I'm just looking at performance between the two. What I'm going to do working with this client is show them what a convertible term policy could look like for them by just switching over that 140amonth. 1680. Let's see what that could look like. More death benefit, more protection, more living benefits over here. And then looking at this extra money, could we either put a whole life together, could we invest this money? Or is there a world we can do all of it together to improve this person's chances of retiring at the desired age that they want to retire at?

Right.

And then also, what do we do with this iul? It's another question here. What do we do with it? Do we keep funding it or do we call it quits now if we're going to call it quits, Another thing that we could look at is doing what's called a 1035 exchange into a whole life. I wouldn't 1035 exchange into another IUL. The experience hasn't been great for this client. So if we looked at a 1035 exchange into a whole life, we would get that surrender value, that 32, 44, 31, maybe more, not sure. And roll over the money that's in there into this whole life funding 1680. But then also I would say, well, can we do more? Can we fund more? This is what your policy was originally designed where you could fund up to 49. So we could design a whole life where we're funding say 4900, 4000, 4500.

Right.

As our high. And just do that and let's see what that would look like. Plus the injection of some capital in the first year would be one of the guidances that I would provide here for this client. And also a convertible term option with living benefits and take the difference and maybe apply that toward debt elimination, increasing of income, maybe investing into something that she wants to do. Now I want to read some questions off and I'll just simply share my screen so you can quickly see these questions that I think are extremely important again to ask your agent. How much cash value can I borrow against in years 1, 2, 3, 4, 5?

Right.

Will the cap rate or participation rate go down after my policy is enforced? I believe that's what happened with this case study. Is there cap rate or participation rates? However the money is being allocated in the account must have went down. Okay, so the follow up question would be what's the history of this insurance company you're recommending with lower cap Rates and par rates. In what circumstances will I encounter a taxable event with this policy? With this client on the board here, what they're going to face if they keep paying. In 1680, this policy is already underperformed. The chances of it catching up, highly unlikely. According to the thing with lower cap rates and par rates, in what circumstances will I encounter a taxable event with this policy? With this client on the board here, what they're going to face if they keep paying. In 1680, this policy is already underperformed. The chances of it catching up, highly unlikely. According to the guaranteed illustrations of her policy, it will become a mech later in life, around her late 60s, possibly 70s. If she doesn't pay in more money, she'll be forced to pay in more money. Does anyone want to be paying in more money? When you've already retired and you're on a fixed income, you know, you got your expenses laid out, Chances are not so much. Number four. Is my policy minimally funded, target funded, or max funded? Okay, that's super important. Those are the three numbers that I gave earlier. Does this IUL outperform the S and P over the same time period? It doesn't. Can you show me five policies that have outperformed their original illustrations after a minimum of five years?

Right.

Shoot. I don't even think you'll get one with most IUL agents, okay. Because they just haven't even been in the industry that long. And if they have, sometimes there's a lot of gatekeepers. You know, I've personally been going through this process where, not that I'm going undercover because it's hard for me to go under the COVID at this point, but I've actually reached out to IUL agents, go through their process. I let them know who I am. My name is Denzel Rodriguez.

Right.

I'm a financial coach. I'm a content creator. Like, you can look me up. And whenever you're in a conversation with anybody, 100% of the time, 100% of conversations I've ever had with someone, a stranger on the street at a business event, networking event, family and friends, people over the phone, anytime I tell them I'm a content creator, they're like, what's your channel? That's the next question. Oh, what platform? What social media are you on? So when I've spoken to IUL agents, they have that ability to look me up and see where I'm coming from. If they don't do that, that's on you, right? But I let them know I'M a content creator, a coach, insurance agent. I'm licensed. I don't know how to design Iuls.

Right?

I don't claim I do. So I reach out to IUL agents to see what can you design for me? What can you show me? How can you educate me so I can educate my audience better? Maybe there's a potential partnership. That's usually how I present it. So when I say gatekeepers, what I just mentioned earlier, they often do not share either the full policy illustration contract. They got me on a zoom. They only share, like a couple of the pages. They don't. They don't go into all the knickknack details. They don't give me everything. It's kind of weird. So I feel like they're being. They're gatekeepers because they're not giving all the information. So I can assure you you're going to be met with a. A lot of defenses when you're asking these questions. But this is simply equipping you as a customer because you don't know what questions to ask when you're being first introduced to an IUL. It's not as easy as funding a 401k or opening up a Roth IRA or brokerage account. It's not that easy. This is way more complex. So does the IUL outperform the S&P 500 over the same time period? Can you show me real policies? How many of your clients have successfully drawn retirement income from their IUL or at least 10 years into retirement? Here's the issue you're going to have is IUL has only been around for like maybe 30 years or less.

Okay?

So there's not a whole lot of people yet that probably are pulling income yet. What ways can I use my policy? What ways can my policy lose value?

Right.

How can this policy raise, reduce in performance? I would say if you underfund it below the optimal levels, if the S and P goes. If the stock market goes down, right? If you only receive the. The guarantees of your iul, it's typically zero.

Right.

Does the illustration show the policy lapsing? Every single IUL policy I've ever had designed for me on the guaranteed levels, all lapse. When I'm in my late 90s or 80s or 70s, they all lapse on the guaranteed. Now, the agent will say, the likelihood of you getting the guaranteed rate every single year for you funding the policy is highly, highly, highly, highly unlikely. Which I agree. So then I look at the midpoint assumption, right? Because it's mid. It's like in between every single IUL policy I've had designed for me. Denzel 29 years old, when I was 27 years old, when I was 25 years old. Like I've every single IUL policy, transamerica, national Life alliance, all of them under the midpoint assumptions, the policy fails later in life. Late 80s 90s. It goes further than the guarantees, but it still fails. And I'm like, even if I'm optimally funding, that doesn't make sense. Why is that?

Okay.

And there's a few more questions. I won't dive into it. But again, if you want to get those from me directly, that would be an action step coming out of this video. Happy to give that to you. If you want to have me take a in depth review on your iul, please send it to me and we can do a coaching call and I can work through it. Just like I've been working with this client here to help them come to a decision how they can move forward. If you're someone that has IUL that you've been funding for years now and it has performed according to the original illustration or better, please reach out. Please email me. I would love to do a case study on your IUL to see if there's anyone out here who has an IUL that's been performing well and let's look at how it was designed and how it was funded so that we can make better decisions.

Okay?

I don't hate iul. I personally have never sold an iul. I don't know how to design an IUL for optimal performance. So I'm relying on other IUL agents out there in the industry and also my clients that bring policies like this. In my seven year career from 2018 to 2025, I've never seen an enforce IUL policy that has performed better than the original illustration. Never seen it. I would like to. That would give me some hope that my clients that are buying Iuls left and right that it's going to do what it says it's going to do. But according to history and facts and evidence, I'm just not seeing that. So again, my name is Denzel Rodriguez, personal finance geek of the 21st century. You want to jump on a call with me? Do coaching, want to help you, help you with debt, your credit, your personal cash flows, funding a life insurance policy to save money to get all the benefits of life insurance. You want to put an entire strategy together to help you retire sooner, ultimately create financial freedom in your life. Click the links below. I've got partners I work with. I don't work alone. What I do is build a financial dream team around you to help you succeed in your life. You're not going to know everything. It's impossible to do it all by yourself. You don't know what you don't know. And so when we bring other brains into your financial situation, we can have a mastermind and we can ultimately unlock huge potential for your life and ultimately live a very intentional life. Living your life on purpose and fulfilling your purpose in life according to your Father in heaven. So with that being said, have a wonderful day, God bless.

It will be fun.