Is indexed universal life insurance (IUL) worth it? For the vast majority of people it is sold to, no. And the reason has less to do with the math than with how good certainty feels. A high-profile lawsuit shows exactly how it happens.

When something sounds too good to be true, what exactly happens in our brains? That’s the question I’ve been thinking about after reading about NASCAR driver Kyle Busch’s lawsuit against Pacific Life over indexed universal life insurance policies.

This isn’t going to be one of those talks about how insurance companies are evil. It’s not an emotional rant about greedy insurance agents and the enormous commissions they receive. Many of these products do involve enormous commissions. That part is true. But the real story involving Kyle Busch is much more complicated. The real story is about human behavior. It’s about how willing we are to suspend our skepticism when someone offers us emotional relief, security, predictability, tax-free withdrawals, protection, the appearance of sophistication, the feeling that we’re doing what the wealthy people do. And that’s powerful.

I don’t think most people fully appreciate how emotionally vulnerable we are to products that promise certainty. Especially financial certainty.

What Happened

Kyle Busch and his wife filed suit against Pacific Life over indexed universal life policies they had purchased years before. The understanding, at least from their perspective, was that they would make premium payments over roughly 5 years and then essentially be set for life. But years later, additional premiums were required to keep the policies functioning as illustrated. Why? Because the underlying assumptions embedded in the original illustrations didn’t materialize as expected. Insurance costs, internal policy mechanics, caps, participation rates, all the terms buried deep within these complex structures.

Everybody jumps to the conclusion of fraud. But how about asking some harder questions? How was this explained? How much was understood? How much was conveniently not understood? At what point does personal responsibility enter the equation? That’s not sarcasm. That’s a legitimate question.

Kyle Busch literally said out loud that these policies sounded too good to be true. Think about that statement for a moment. In so many words: “We felt like it was too good to be true, but we bought them anyway.” I think that’s the tension here. And I think that’s the part that makes people uncomfortable.

The Emotional Shorthand

There’s only so much cognitive load most people can take on. So naturally, we simplify things emotionally. We reduce products down to shorthand. It’s insurance. It’s safe. It’s tax-free. It’s what wealthy people do. Once that emotional shorthand takes hold, the complexity underneath becomes irrelevant. At least psychologically.

Investing, done correctly, is remarkably simple technically. Buy productive businesses, reinvest the dividends, let compounding do its work over decades. It’s simpler than real estate, simpler than running a business. But emotionally? Entirely different. Uncertainty enters the picture. Volatility. Temporary declines. The possibility of looking foolish. That’s why we exist as financial advisors. Not because investing is complicated. Because human beings are emotional.

So why are people buying products like indexed universal life and variable annuities? I think they’re buying emotional relief. Relief from uncertainty, relief from complexity, relief from making the wrong decision. Perhaps more than anything, relief from looking stupid. And I think that status plays a massive role here.

Status Is the Real Sales Pitch

Years ago, I was shopping for straight forward term life insurance. The company I had been using wasn’t giving me the limits I needed to protect my family and the business. Simple setup. Twenty to thirty year policies, fixed premiums, fixed death benefits. Clean, understandable. Very quickly, the conversation shifted. Suddenly it became about my apparent need for whole life insurance. Let me be clear: I despise these products in an overwhelming majority of circumstances. Hate is probably not strong enough of a word.

But the fascinating part was how the pitch shifted emotionally. The agent started appealing directly to status. “Your wealthy clients are going to expect that you have this kind of planning in place for yourself. That’s what wealthy people do.” Not logic. Not mathematics. Not suitability. Status. The implication being, if sophisticated wealthy people do this and you don’t, what does that say about you?

Emotionally, these products feel sophisticated. And that’s the key.

The Invisible Fee Problem

I think about my college buddy. Great guy, running his dad’s business, doing well. He brought me his statements. Several hundred thousand dollars sitting inside variable annuities. He’s in his early 30s. Not married, no kids. I asked him why he needed insurance wrappers around his liquid investment assets. He couldn’t answer. But here’s the kicker: he decided not to work with me because he didn’t want to pay a fee. While simultaneously owning products riddled with internal insurance costs, mortality expenses, riders, and surrender charges he didn’t understand.

Mind-boggling, right? But honestly, not uncommon.

The fee inside the annuity was invisible. My fee was very visible. Emotionally, visible pain tends to feel worse than invisible pain. This isn’t about mathematics. This isn’t about logic. This is behavioral finance. This is human behavior.

Clarity Is the Job

Are the Busch family victims? Maybe. Were things glossed over? Probably. Were projections overly aggressive? Quite possible. Did the policies contain pages of fine print explaining that the assumptions aren’t guarantees? I’m sure they did. But Kyle Busch said it sounded too good to be true. So where exactly does responsibility begin?

I think many of these products are inappropriate for the vast majority of people they’re sold to. And I think a lot of agents lean into emotional manipulation, complexity, and status signaling to sell them. But people have responsibility too. At some point, we have to acknowledge that people are actually willing not to understand because certainty feels so good. Isn’t that the real allure here? Certainty, or at least the appearance of it.

That’s why neutrality from an advisor is not enough. If someone brings one of these products to us and we calmly sit there with some watered-down list of pros and cons, I think we’re failing them. I know we’re failing them. Because we’re not respecting how powerful human behavior is. They need to know in a crystal clear way what we believe. It cannot be misunderstood.

Because if the insurance only works under ideal assumptions, favorable projections, and the potential for continued support by more premiums, then what was the point of the insurance in the first place?

When was the last time a financial product was pitched to you in a way that felt more like a status symbol than a financial decision?

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Ben Beck is Managing Partner & Chief Investment Officer at Beck Bode, a deliberately different wealth management firm with a unique view on investing, business and life. Subscribe to his newsletter Relentless Abandon on LinkedIn.