Is IUL a Scam? No. Here Is What Goes Wrong When It Is Sold Badly

Written and reviewed by Hans Goldstein, licensed insurance producer, NPN 20602398 · CA Insurance License #4273294
Last reviewed October 3, 2026 · Published October 3, 2026

The four patterns behind most complaints

Where IUL sales go wrong

Hans's own line on the last one: if someone pitches cash value accumulation to a 65-year-old, they either have not run the cost of insurance or are not putting the client first. At that age, an IUL is a death benefit tool. Why.

The legal record, stated plainly

• In Mamboleo v. Pacific Life, a class alleging misleading PDX IUL illustrations settled for about $58 million ($33 million plus up to $25 million), approved in May 2026 (settlement website).
• Older universal life policies sold in the 1980s and 1990s were often illustrated at 10% to 13% and later earned about 4% to 4.5%; many needed far more premium than owners expected (Wall Street Journal, 2018).
• Insurers have changed caps on older IUL products in both directions; Transamerica's December 2023 changes affected a subset of older policies (NFG summary).

How regulators responded

NAIC Actuarial Guideline 49 (2015) set guardrails on illustrated rates; AG 49-A (for sales from December 14, 2020) limited the illustrated rate and loan spreads; a 2023 revision addressed newer index designs; a further revision was adopted in December 2025 (SOA summary; NAIC AG 49-A). California requires every illustration to show guaranteed, midpoint and illustrated values (CA Ins. Code 10509.956).

A five-minute self-check

1. Ask for the guaranteed and midpoint columns. Does the policy last to 100 on the midpoint column at your planned premium?
2. Ask what percent of the 7-pay (MEC) limit your premium is. Near the limit builds cash fastest; far below it is a protection design.
3. Ask for the loan type you would use and its current rate, and what a 0% index year does to it.
4. If you are over 60 and the pitch is about cash value, ask what the death benefit is for.
5. Ask what the agent earns. In California you may ask, and a good agent will tell you.

Hans's opinion, not a rule: an IUL done right (funded close to the limit, for 15+ years, by someone who needs the death benefit) is an efficient way to pair permanent coverage with cash value. IUL pros and cons · Max-funded IUL.

Own an IUL, or weighing one?

Send the illustration or annual statement. Within one business day you get a written read on the Goldstein Index: funding level, charges, loan cost and lapse risk.

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Rather talk it through? Or book 15 minutes on Hans’s calendar, or call 213-414-2808.

Hans Goldstein · 213-414-2808 · NPN 20602398, independent licensed insurance producer

Frequently asked questions

Sources

1. Mamboleo v. Pacific Life (Orange County Sup. Ct. No. 30-2021-01208045-CU-BT-CXC): class alleged misleading illustrations/marketing for Pacific Discovery Xelerator (PDX) IUL sold in California 2017-2019; settlement of about $58M ($33M credited to in-force policies + up to $25M term-insurance relief for lapsed/surrendered); final approval May 7, 2026; distribution by Sept 11, 2026; Pacific Life denies wrongdoing (as of 2026-05-07)
2. 1980s-90s universal life was often illustrated at continuous 10%-13% rates; policies later earned about 4%-4.5% and many face lapse or steep premium increases (as of 2018-09-19)
3. Transamerica changed cap rates on index accounts of a subset of previously sold IUL products effective December 16, 2023 (some up, some down); no change to floors or participation rates (as of 2023-12-12)
4. AG 49 (2015) was developed by NAIC's Life Actuarial Task Force to bring consistency to IUL illustrations, setting guardrails on the maximum illustrated rate; AG 49-A (2020) stopped illustrated leverage on multipliers/bonuses; the 2023 'quick fix' (policies issued on or after May 1, 2023) limited illustrated option profit to the benchmark account (as of 2023-06)
5. NAIC AG 49-A states its rationale as lack of uniform practice: two illustrations using the same index and crediting method often illustrated different credited rates; it caps the illustrated rate, limits illustrated loan leverage, and adds side-by-side disclosure. Applies to policies sold on or after December 14, 2020 (as of 2025-12-11)
6. Ins. Code 10509.956(c)(1) requires the basic illustration's numeric summary at years 5, 10, 20 and age 70 on three bases: (A) policy guarantees, (B) the insurer's illustrated scale, and (C) a midpoint scale (dividends at 50%, credited interest and charges at the average of guaranteed and illustrated) (as of 1997-07-01)