NASCAR star Kyle Busch and his wife, Samantha, recently said they lost more than $8 million after buying a life insurance policy that they claim was pitched to them as a “tax-free retirement plan.”
“I never thought something like this could happen to us,” he said. “These policies were sold to us as part of a retirement plan — something safe and secure that would grow tax-free and protect our family long after racing,” Busch said in a press release.
The couple allege an insurer and agent sold them a policy that turned out to be anything but safe.
“We trusted the people who sold them, and the name Pacific Life. But the reality is far different. What was pitched as retirement income turned out to be a financial trap,” said Busch.
Busch and his wife say they paid more than $10.4 million in premiums for an Indexed Universal Life (IUL) insurance policy, which is a type of permanent life insurance with a cash value feature.
According to a report from Autoweek, Busch anticipated that after making five payments he would be able to take out $800,000 a year from age 52 until he died [1].
“That was a lie. I looked at it and like, sounds too good to be true, but, you know, got to believe in those that are looking at it for you and telling you to believe it,” he said.
It was a red flag when they received a sixth premium payment notice. They were given the runaround when they asked questions. After consulting an independent firm, they learned their policy would expire within 16 months, essentially wiping out $10.4 million.
They have since filed a lawsuit claiming they suffered over $8.5 million in net out-of-pocket losses and accusing the insurer and its agent of misrepresenting the IUL policy as a safe, self-funding retirement vehicle.
Trending: Are you richer than you think? Here are 5 clear signs you’re punching way above the average American’s wealth
At the heart of the story is the product known as an indexed universal life (IUL) insurance policy.
This permanent life insurance contract combines death-benefit protection with a cash-value component whose growth is tied to a stock-market index (e.g., the S&P 500), albeit indirectly. There is typically supposed to be some downside protection.
Story Continues
On the surface, this sounds attractive: lifelong coverage, tax-free death benefit, and potential for tax-deferred accumulation. Beneath the marketing lies hidden costs and a risk of policy collapse if assumptions don’t hold.
Key risk factors include:
High fees: The cost of insurance charges can increase with age and can erode cash value.
Caps and participation rates on index-linked growth: If the market soars, you may only receive the cap rate indicated in your policy.
Dependence on premium funding and policy performance: If you stop or reduce premium payments — or growth underwhelms — the policy may lapse.
Misleading illustrations: Sales materials may show optimistic growth projections that do not account for changing costs or realistic index returns.
In Busch’s case, he says he was misled into believing he would have a “tax-free retirement plan” and growth that would self-fund premiums.
And he’s not alone.
“This is not just an issue for celebrities or professional athletes. It is an issue for everyday Americans,” said Robert G. Rikard, founding attorney of RP Legal. “Across the country, teachers, small business owners, and retirees are being sold complex life-insurance contracts as if they were simple, risk-free retirement plans. The danger lies not in the product itself, but in how it’s marketed and presented as guaranteed paths to retirement security.”
If you’re being sold an IUL policy as a guaranteed tax-free retirement plan, this story provides a cautionary tale. Before proceeding, consider the following steps:
Understand the product: Ask about the cost of insurance, fees, caps, participation rates, and what happens if premiums stop or growth underperforms.
Ask for worst-case projections: What happens if the index stays flat for 10 years or premiums increase?
Compare simpler alternatives: For many, a term life policy combined with direct investments in an RRSP or 401(k) equivalent may offer clearer costs and better flexibility.
Seek independent advice: The salesperson may have a strong incentive for a large commission, so consider seeking independent financial advisors for the best course of action.
The legal claims in the Busch matter include misrepresentation, negligence, and unfair trade practices.
“Pacific Life and its agents concealed the products’ inherent complexity, hidden costs, and extreme volatility,” says the complaint. “The sales strategy was designed to create the illusion of stability and investment-grade performance while masking structural risks that guaranteed eventual policy failure.”
Regulators have warned about the risks associated with IULs because the policies may not perform as expected if conditions change or premiums aren’t maintained.
The Busch case reminds us that the combination of high premiums and an aggressive sales pitch can lead to a significant risk.
If you’re evaluating an IUL, question whether you’re buying life insurance or an investment disguised as insurance, and make sure you understand what you’re signing up for.
Join 200,000+ readers and get Moneywise’s best stories and exclusive interviews first — clear insights curated and delivered weekly. Subscribe now.
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
Autoweek (1)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.