Understanding Your Investments: A Cautionary Tale

One of our clients recently sent in an article involving a famous NASCAR driver and his insurance policy through Pacific Life Insurance Company that is now making headlines.

Our client wanted to make sure there wasn’t anything they should be concerned with regarding their own Term Life Insurance policy, as we sometimes utilize Pacific Life to provide income protection with Term Life Insurance. 

Kyle & Samantha Busch recently filed a lawsuit alleging that the product they bought from Pacific Life Insurance Company — a type of Indexed Universal Life (IUL) insurance — was pitched as a safe, tax-advantaged retirement plan, but instead resulted in serious losses.

Here is a link to the full article.

Here’s a breakdown of what allegedly happened, and — most importantly — what it teaches us about investing and insurance.

What Happened in the Case

• The Buschs say they were sold IUL policies by Pacific Life and its agent that were portrayed as long-term retirement tools: tax-free growth, guaranteed benefits, self-sustaining income streams. 

• In reality, the lawsuit claims, these policies carried unrealistic growth assumptions, hidden fees, and rising policy costs that undermined value. 

• According to their complaint, they paid over $10.4 million in premiums and ended up with out-of-pocket losses of about $8.58 million.

• The legal team representing them highlights that this isn’t just a celebrity issue — the same kinds of products are being sold to teachers, small business owners, retirees, everyday consumers. 

Key Take-aways for Investors & Policy-Holders

1. Understand exactly what you’re investing in.
   Even though it was sold as “retirement income,” this product was an insurance contract with investment features — not a straightforward retirement fund.

   The performance depends on indices, fees, policy costs, and assumptions.

2. Insurance ≠ Investment (or at least not a simple one).
   Life insurance is primarily designed to cover risk (e.g., protect your family if you pass away). When it’s layered with investment features (like an IUL) it becomes complex.

   The Buschs’ case reminds us that marketing can blur the lines.

3. Projected returns and “guarantees” may not match reality.
   With IULs, the “indexed” part means you’re tied to market indexes (or caps) and policy costs may escalate.

   Growth rates used in illustrations can be optimistic. If assumptions don’t work out (index under-performance, higher costs, loans/withdrawals), the vehicle may underperform.

4. Fees, costs, and rising insurance costs matter — especially in the long term.
   The lawsuit points out that rising policy costs and decreasing cash values can derail a plan just when someone expects stability.

   You need full transparency on all fees and policy mechanics.

5. Treat product pitches with healthy skepticism.
   Our process is holistic and comprehensive.

   When someone comes to you to pitch a product and its features without speaking about your entire situation and financial plan, it is healthy to approach this with a level of skepticism.

   Just because a big-name insurer markets something as “tax-free income” or “self-sustaining retirement plan” doesn’t mean there are no trade-offs.

   As the Buschs note, if it could happen to them, it could happen to many others.

Best Practices Before You Commit to Such a Product

• Ask for clear, realistic projections (not just best-case). See how the model holds up under conservative assumptions — lower growth, higher costs, longer time horizon.

• Understand what drives your cost of insurance, what happens if you withdraw or borrow from the policy, and what happens if the index underperforms.

• Compare this insurance-based strategy to alternative retirement investment options (IRAs, 401(k)s, bonds, mutual funds) that may offer simpler structures, more transparency, and lower fees. Ask how this may impact other parts of your financial plan, like your cash flow and liquid investments. 

• Consult a qualified fiduciary advisor who is independent (not only the insurance agent) — someone who can walk you through all the “what ifs.”

• Monitor your policy over time. Just because the plan looked good at purchase doesn’t mean it will stay on course if circumstances (market, health, policy costs) change.

The Busch case is a cautionary tale. It shows that even well-resourced individuals can end up in a product that doesn’t meet expectations — when the pitch, risk structure, or fees aren’t fully understood.

If you’re considering using life insurance as part of your retirement strategy, make sure you know what you’re invested in, why you’re choosing that product, what the potential downsides are, and how this works within your overall financial plan.

Retirement is one of the few times you really can’t afford surprises.

Will