Misleading PacLife IUL Marketing Could Lead to Policy Surrender

Pacific Life Insurance Company may have sold their indexed universal life (IUL) policies under misleading sales representations, which resulted in some consumers surrendering their policies due to unexpected fees.

A class action lawsuit filed in California against Pacific Life Insurance Company (PacLife) challenges its sales and marketing representations. According to this suit, the insurance company routinely used false marketing when advertising their IUL PDX policies to prospective customers. These representations allegedly downplayed the costs and risks associated with the PDX indexed life insurance policies while overstating the potential interest gains.

Indexed Life Insurance: Overview

An indexed life insurance policy is a special type of insurance with an interest rate directly linked to a market index, such as the S&P 500. This varies from other life insurance policies with either fixed or variable interest rates. With an IUL, interest rates can increase significantly — much higher than fixed interest rates — when the linked market index performs well. Inversely, when the market is not performing well, interest rates can be extremely low.

Pacific Life Insurance Company offers their own IUL policy known as the Pacific Discovery Xelerator (PDX) IUL. According to the company, these policies offer “protection for your loved ones,” “tax-deferred growth potential,” “tax-free supplemental income potential,” and other benefits.

However, legal allegations against the company indicate that these promises may be false. Consumers are accusing PacLife of violating consumer protection laws by deceiving their customers and failing to disclose the risks and fees associated with their PDX policies.

IUL Policy Surrender

Unfortunately, misleading representations about the costs and risks of a IUL policy can have significant consequences. With unexpectedly high premiums and subpar returns, consumers may be forced to surrender their policy due to the negative impact of the insurance, according to Investopedia.

When a policyholder surrenders their PacLife IUL policy, they may lose money that they paid into the policy through premium payments. These costs may come in the form of surrender penalties deducted from the policy’s actual cash value.

A IUL policy’s cash value is the amount of money that a policy generates through interest revenue. When a policy is surrendered, the policyholder will lose the premiums they paid. However, they may be able to recover a portion of the policy’s cash value.

The exact amount that a policyholder can walk away with will vary depending on the surrender fees charged by their insurance provider. According to Pacific Life’s IUL marketing materials, a surrender charge will apply to all policies surrendered within their first 10 years. This surrender charge will reduce the policy’s available cash value — thereby limiting the amount that a policyholder can collect after surrendering their policy.

Consumers who surrendered their policy after relying on misleading representations from PacLife may be able to take action for their financial damages. Attorneys are interested in speaking to Pacific Life Insurance Company customers who had a PDX IUL policy issued between February 2017 and early 2019. Policyholders from all states may be eligible for legal action, though lawyers are especially interested in speaking to consumers from Arizona, California, Florida, Illinois, Michigan, Minnesota, and New Jersey.