Shocking death of Kyle Busch renews debate over IUL plan

The sudden death Thursday of 41-year-old racing icon Kyle Busch has reignited an intense debate regarding the role of indexed universal life insurance in financial planning.

The Busch Family, Richard Childress Racing and NASCAR issued a joint statement Thursday saying Busch died after being hospitalized. No cause of death was given.

Busch’s family said earlier Thursday that he was hospitalized with a “severe illness,” three days before he was to compete in the Coca-Cola 600 at Charlotte Motor Speedway.

Busch was testing in the Chevrolet racing simulator in Concord on Wednesday when he became unresponsive and was transported to a hospital in Charlotte, several people familiar with the situation told The Associated Press.

One week ago, Busch dominated and won the NASCAR Craftsman Truck Series Ecosave 200 held May 15 at Dover Motor Speedway.

The on-track success came just months after the Busches waged a very public battle with the life insurance industry.

Life insurance lawsuit

Kyle and Samantha Busch sued Pacific Life Insurance Co. in October, claiming they lost more than $8.5 million after being misled into purchasing life insurance policies. They claim they paid over $10.4 million in premiums based on misleading illustrations and false promises of guaranteed returns.

The Busches reached an out-of-court settlement with PacLife, according to a Feb. 26 court filing. Terms were confidential.

The filing in the Western District of North Carolina alleged the Buschs purchased five separate IUL policies between 2018 and 2022 to provide more than $90 million in insurance protection for the two-time NASCAR champion.

Some of the Busch policies were lapsed before the litigation, while two were exchanged for other policies.

That math inspired a vocal defense of life insurance during spirited debates aired on LinkedIn.

"Such a shame they were advised to surrender the policy," one industry veteran commented.

Inflexible and risky

Kyle Busch was assured that by contributing a million dollars annually for five years, he could withdraw $800,000 per year starting at age 52, he said in a news release. Instead, Busch discovered that his funds were being directed to the insurance company's account rather than being invested in the market, preventing his investment from growing as the market rose.

In its motion to dismiss, PacLife noted that the Busches signed policy illustrations indicating they intended to pay planned premiums and hold the policies over 30 years. Instead, the couple bailed out on the plan and surrendered the policies before their growth potential could be realized, a memorandum accompanying the motion reads.

IUL critics said Busch's sad and tragic death does not sway their opinion.

Had he been ill during the dispute, PacLife would have restructured the policies or perhaps negotiated for term policies as part of the replacement, said Larry J. Rybka, chairman and CEO of Valmark Financial Group.

"As structured, these were policies that were going to lapse," Rybka added via email. "As a 41-year-old he paid 8.5M dollars for 70M of death benefit, making them some of the most expensive, inflexible, and riskiest term policies in the world."

Correction: A previous version of this story incorrectly stated when the Busches lapsed their policies.

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.