The Importance of Transparency in IUL Policies: Lessons the Industry Can’t Ignore
In light of recent headlines, it’s time to address an uncomfortable truth in our industry: Not all life insurance advice is created equal, and too often, consumers pay the price.
While there is already a low barrier to entry in becoming an insurance advisor, and with recent regulatory shifts in states like California which have made licensing even easier to obtain, a large segment of the life insurance marketplace remains driven by quick transactions, high commissions, and oversimplified promises. The result? Clients are frequently matched with products that were designed to reward the salesperson more than they were designed to support the long-term financial well-being of the client.
At Watermark Life Insurance, we believe this is the exact opposite of how permanent, cash value life insurance should function or be sold. When designed appropriately, it can support:
Tax-efficient long-term growth
Provide protection & liquidity options throughout life
Create wealth transfer and intergenerational planning
Help clients plan for strategic business successions
Provide family income replacement leveraged by death benefit planning
This requires careful structuring, realistic assumptions, and an honest conversation about what the product can and cannot do.
Life insurance should not be meant to replace a full retirement plan but to supplement it. Transparency matters, and the strategy should be presented responsibly, without overselling or misrepresenting its purpose.
When products are sold that way, consumers end up with unrealistic expectations, underperforming policies, and in some cases, significant financial losses.
Why Situations Like These High-Profile Cases Happen
You don’t have to name any lawsuit to understand the pattern: recent national headlines make it clear how dangerous misaligned incentives can be. More often, they’re the result of a policy that wasn’t structured or designed properly. Whether premium financing was involved or not, the core issue typically comes down to poor design, lack of disclosures, and unrealistic projects or assumptions.
Issues tend to arise when:
Projections seem unbelievably strong and no stress tests are shown
Aggressive crediting assumptions are shown
Policies depend heavily on non-guaranteed elements
Cost structures get buried in glossy illustrations
There is a lack of annual monitoring and forecasting
Agents intentionally manipulate increase on commission
Take this common scenario: a policy with a modest crediting rate somehow projects long-term performance that resembles a high-flying investment portfolio. That’s the equivalent of seeing a retirement account projection where years of mediocre or even negative returns magically turn into exceptional long-term growth. Anyone would raise an eyebrow.
But in insurance illustrations, those red flags often go unnoticed. Most consumers, and many agents, don’t have the tools or capabilities to spot when internally inconsistent modeling signals a deeper problem.
When a policy shows outcomes that don’t align with the math, that’s not a fluke. It’s usually a sign of flawed design, overlooked or underexplained analysis, or greedy sales practices. And without proper guidance, it’s easy for even well-intentioned buyers to misunderstand what’s realistic and what isn’t. This is a complicated product and requires well-educated agents and advisors to understand the inner workings.
The Real Problem: Policy Analysis Is Extremely Complex
Modern cash value life insurance is one of the most intricate financial instruments available. Evaluating it properly requires:
Understanding internal policy expenses
Assessing crediting methodologies
Stress-testing non-guaranteed assumptions
Reviewing company historical crediting rates along with participating and cap rates
Comparing policy fees across multiple carriers
Testing scenarios for long-term sustainability
Most consumers cannot reasonably do this alone. And most agents simply are not trained or incentivized to do this level of analysis.
A major red flag is when an agent sells solely off an illustration or compares two carriers using only projections without examining the expenses or assumptions behind them. But unfortunately, it remains widespread.
The Solution: Independent, Objective Guidance
Many advisors don’t have access to, or simply don’t have the expertise and understanding to evaluate whether a policy is truly built to perform over the long term. Few take the extra step to collaborate with specialists who understand product design nuances, actuarial mechanics, or long-term policy sustainability. Yet this level of objective, experience-driven evaluation is often the difference between a policy that’s engineered to endure for the client… and one that’s structured around compensation instead of outcomes.
At Watermark, we believe clients deserve intentional, transparent planning: not guesswork, not sales pitches, and not inflated illustrations. When appropriate, we collaborate with other financial professionals, such as:
Financial Advisors: Help them round out their clients' financial plans with essential protection.
Property & Casualty Agents: Offer their clients a holistic approach to risk management, extending beyond home and auto.
Medicare Agents: Address the broader financial needs of their senior clientele.
CPAs: Provide solutions that integrate seamlessly with their clients' tax and financial planning.
CDFAs (Certified Divorce Financial Analysts): Assist in securing the financial future of individuals navigating life changing events.
Estate Planning Attorneys: Complement their services by ensuring their clients' legacies are protected.
Business Attorneys: Help business owners safeguard their enterprises and their families.
Career Insurance Agents: Expand their product offerings and client solutions.
Group Brokers: Bring individual protection solutions to their group business owners.
Our Commitment to Clients
The recent industry controversies are not a surprise to those who have seen how overly optimistic projections and commission-driven advice can distort policy design. But they are preventable.
At Watermark Life Insurance, we commit to:
Education first to ensure clients understand the “why,” not just the “what”
Suitability and transparency to building plans based on realistic assumptions
Independent analysis and pressure-testing policies before decisions are made
Long-term stewardship that require monitoring the performance and sustainability of plans
Life insurance can be one of the most valuable tools in a family’s financial strategy, but only when structured with care and grounded in truth.
If you’re evaluating a policy, reviewing an existing one, or simply want clarity around how advanced strategies actually work, we’re here to help you navigate it with confidence.