Life Insurance Under Scrutiny June 2026: STOLI Ruling, Premium-Financed IUL Failures, and VUL Sales Surge
The life insurance industry is navigating a complex landscape in June 2026. Between a federal appeals court voiding $8 million in stranger-originated life insurance (STOLI) policies, an industry executive sounding the alarm on premium-financed indexed universal life (IUL) products, and a 15% surge in variable universal life (VUL) sales, consumers have more information — and more reason for caution — than ever before. This edition of our industry roundup examines the stories that matter most to policyholders and those shopping for coverage in 2026.
1. Federal Appeals Court Voids $8 Million in STOLI Policies in Landmark Consumer Protection Ruling
The United States Court of Appeals for the Third Circuit handed down a significant consumer protection victory on June 15, 2026, affirming a lower court ruling that voided two life insurance policies with a combined face value of $8 million. The court found the policies constituted illegal stranger-originated life insurance (STOLI) under New Jersey law, rejecting claims by investor Retirement Value LLC, which sought to collect death benefits after the insured, Haya Majerovic, died in 2019.
The dispute traced back to 2007, when Majerovic’s son entered into an agreement with investors — identified in court documents as two religious organizations, Congregation Sons of Ateres Joshua and Congregation Beis Shloma — under which the son would obtain life insurance on his mother’s life while investors funded all premium payments. Per the arrangement, investors were entitled to 90% of the policy’s value upon sale or maturity, with the family receiving only 10% after deducting premium costs. Critically, the Majerovic family never paid any premiums on the policies.
The policies, originally issued by Jefferson Pilot Life Insurance Co. (a predecessor to Lincoln National Life Insurance Co.), were owned by the Haya Majerovic Family Trust based in Lakewood, New Jersey. After a series of transfers — first to James Settlement Services, then to Retirement Value — the investors attempted to collect death benefits following Majerovic’s passing. Lincoln filed suit in 2021 seeking a declaration that the policies were void from inception because they lacked a valid insurable interest.
Writing for the three-judge panel, Judge Luis Felipe Restrepo concluded that New Jersey law applied because the policies “were applied for by a New Jersey-based trust, the application was signed in New Jersey, the policies were issued for delivery to the Trust at its New Jersey address, and the Trust received the policies in New Jersey.” Under New Jersey law, STOLI arrangements violate public policy and are void from inception because “investors had no insurable interest in the life of the insured but yet were the intended beneficiaries of her life insurance policies.”
The ruling represents another victory for insurers challenging investor-backed life insurance arrangements that courts have increasingly scrutinized as illegal wagering contracts. This decision should serve as a warning to consumers: if someone you don’t know offers to pay your premiums in exchange for a share of your policy’s death benefit, the arrangement is almost certainly illegal and will be voided by the courts.
2. Premium-Financed IUL: Industry Executive Warns the Math No Longer Works
In a hard-hitting opinion piece published June 15, 2026, Larry Rybka — CEO of Valmark Financial Group, which oversees $70 billion in in-force life insurance — declared that premium-financed indexed universal life insurance is failing because “the math no longer works.” His analysis carries particular weight given Valmark’s prohibition on the practice since 2016, a decade before many in the industry began acknowledging the structural problems.
Premium-financed IUL works on a simple premise: borrow money at low interest rates to pay IUL premiums, earn a higher return inside the policy, and pocket the difference. But as Rybka explains, every element of that equation has broken down. “An 8% S&P 500 return can translate to only about 3.82% to 4.30% inside a capped, dividend-free IUL,” he writes, noting that carriers have reduced caps from the mid-teens to roughly 7%–8%. Meanwhile, borrowing costs have risen above 7%, turning “illustrated arbitrage into negative leverage.”
The situation is particularly dangerous for business owners and real estate investors, who Rybka identifies as the primary targets of premium-financing pitches. These clients typically have 80% to 90% of their net worth tied up in illiquid assets. “Premium financing compounds the liquidity problem by adding interest-rate, performance and collateral risk,” Rybka warns. “When these programs fail, the collateralized liquid assets outside the business must be tapped or sold at the worst possible time. This is not a risk-management strategy — it is a risk-multiplication trap.”
Rybka identifies at least three dozen premium-financed IUL cases currently in active litigation, with many others settled before filing. He warns that agents themselves face chargeback risk — lapsed or rescinded financed policies can trigger commission clawbacks of hundreds of thousands of dollars — and that many errors and omissions insurance policies now exclude premium-financing claims entirely.
“Traditional life insurance is designed to transfer risk,” Rybka concludes. “Premium-financed IUL often does the opposite: It concentrates product risk, credit risk, interest-rate risk, collateral risk and liquidity risk into a single structure.”
3. VUL Sales Surge 15% in Q1 2026, Signaling Major Market Shift
While premium-financed IUL faces mounting scrutiny, variable universal life insurance is experiencing a renaissance. According to first-quarter sales data from Wink, Inc. — the authoritative source for insurance industry sales analytics — VUL sales rose 15.1% over Q1 2025, with total first-quarter sales reaching $316.1 million.
Sheryl Moore, CEO of Wink, Inc. and Moore Market Intelligence, attributed the surge to improving market conditions. “The market has been on the uptick since the beginning of April,” Moore said. “This translates to improved sales of variable UL.” The momentum began building in Q4 2025, when VUL sales rose 4.3% year-over-year and 22.4% quarter-over-quarter.
VUL is a permanent life insurance policy that combines a death benefit with an investment component. Policyholders can allocate premiums among various sub-accounts — typically mutual fund-like investment options — giving them direct exposure to equity market performance. Policies can be customized with specific riders to provide coverage for needs such as long-term care.
Prudential retained the No. 1 ranking in VUL sales with a commanding 36.2% market share, followed by Pacific Life Companies, Nationwide, RiverSource Life, and John Hancock. Pruco Life’s PruLife Custom Premier II was the top-selling VUL product across all distribution channels. Cash accumulation was the primary pricing objective for 63.4% of VUL sales, suggesting consumers are increasingly using these policies as investment vehicles rather than pure protection.
The broader life insurance market also showed strength. Total life insurance sales across all products exceeded $2.9 billion in Q1 2026, up 8.1% compared to the same period last year. Whole life sales were particularly robust, rising 22.6% year-over-year to exceed $1.2 billion, driven primarily by final expense coverage (72.4% of sales). Term life sales, however, declined 9.7% to $521.8 million, and fixed universal life sales fell 18% to $65.2 million.
4. Industry Context: IUL Illustration Warnings and the Missing Death Benefits Crisis
The premium-financed IUL warnings from Rybka arrive alongside growing regulatory concern about IUL illustrations broadly. Industry experts have been urging the NAIC to fix flawed IUL illustrations, warning that current assumptions leave consumers with “unrealistic expectations about policy performance and retirement income potential.” The core problem: AG-49, even after multiple reforms, still permits assumptions that overstate likely outcomes by allowing carriers to base illustrations on earning 45% on options.
Separately, consumer advocates continue to warn that life insurers may be missing millions of deaths annually due to gaps in the Death Master File — the Social Security Administration’s database of recorded deaths. The Tennessee Department of Commerce and Insurance recently announced that over $107 million in insurance policies and benefits was located in 2025 for Tennesseans alone through the NAIC’s Life Insurance Policy Locator Service. This free service helps families find unclaimed life insurance benefits from policies they didn’t know existed.
5. Consumer Protection: What These Stories Mean for Policyholders
These four interconnected stories paint a picture of an industry undergoing rapid change, with significant implications for consumers shopping for life insurance in 2026. The common thread is that complexity in life insurance products can work against consumers when not properly understood and disclosed.
The STOLI ruling reinforces a fundamental principle: life insurance requires an insurable interest. If someone without a legitimate relationship to your life is funding your policy, that arrangement is likely illegal and will be voided — leaving your beneficiaries with nothing. Always verify that any life insurance arrangement is structured around a genuine insurable interest.
The premium-financed IUL warnings underscore a broader lesson: leverage-based insurance strategies that depend on favorable market conditions and low interest rates carry substantial risk. Before considering any premium-financing arrangement, consumers should obtain an independent second opinion from a fiduciary advisor who does not benefit from the transaction.
The VUL sales surge demonstrates that consumers are increasingly looking to life insurance for investment growth alongside protection. While VUL can be an effective tool for those comfortable with market risk, it’s essential to understand that investment losses directly reduce cash value and can even jeopardize the policy’s death benefit if funding is insufficient.
Finally, the missing death benefits crisis serves as a reminder to check whether you or your loved ones have unclaimed life insurance benefits. The NAIC’s Life Insurance Policy Locator Service is free and available to all consumers.
Q1 2026 Life Insurance Sales by Product Type — Comparison Table
| Product Type | Q1 2026 Sales | YoY Change | QoQ Change | Market Trend |
|---|---|---|---|---|
| Variable Universal Life | $316.1M | +15.1% | -19.1% | Strong growth, seasonal Q1 dip |
| Whole Life | $1,200M+ | +22.6% | -3.6% | Robust, driven by final expense |
| Indexed Universal Life | $789.5M | +2.8% | -14% | Stable but slowing |
| Term Life | $521.8M | -9.7% | -7.6% | Declining |
| Fixed Universal Life | $65.2M | -18% | -25.9% | Sharp decline |
| Total All Products | $2,900M+ | +8.1% | -9.7% | Overall positive YoY |
Key Industry Developments Timeline — June 2026
| Date | Event | Impact |
|---|---|---|
| June 9 | Wink Q1 2026 Sales Report: VUL up 15.1%, all-life up 8.1% | VUL renaissance confirmed; term/fixed UL declining |
| June 15 | Premium-financed IUL declared structurally failing | Warning for business owners, real estate investors |
| June 15 | Third Circuit voids $8M in STOLI policies under New Jersey law | Reinforces insurable interest doctrine |
| June 18 | IUL illustration warnings: NAIC urged to fix flawed assumptions | Consumer expectations vs. realistic outcomes |
| June 19 | Tennessee: $107M in lost life insurance benefits located in 2025 | National unclaimed benefits crisis highlighted |
| June 22 | Accelerated underwriting transforms life insurance | $5M coverage without blood draws |
| June 24 | Unum faces ERISA lawsuit for $3,467/month underpayment | Disability benefit calculation scrutiny |
Steps to Protect Yourself When Buying Life Insurance in 2026
- Verify insurable interest — Ensure every policy you own or apply for is based on a genuine insurable relationship. STOLI arrangements are illegal and will be voided by courts, leaving beneficiaries with nothing.
- Avoid premium-financing traps — If an agent pitches borrowing money to pay insurance premiums, proceed with extreme caution. Obtain an independent fiduciary review before signing any premium-financing agreement.
- Understand policy illustration assumptions — IUL illustrations can overstate returns by a wide margin. Ask for guaranteed minimum values and stress-test at lower crediting rates. A realistic projection assumes 3–4% returns, not 7–8%.
- Check for unclaimed benefits — Use the NAIC Life Insurance Policy Locator Service (free) to search for policies you or loved ones may have forgotten. Over $107 million was found for Tennesseans alone in 2025.
- Compare multiple carriers and product types — The VUL surge shows that market conditions shift product popularity. Term life remains the most affordable pure protection; whole life offers guaranteed values; VUL adds investment exposure. Choose the type that matches your risk tolerance and financial goals.
- Review beneficiary designations annually — Outdated beneficiary designations are one of the most common reasons life insurance benefits go unclaimed. Update yours after major life events.
- Verify carrier financial strength — Check AM Best, Moody’s, and S&P ratings before purchasing. In a volatile market, carrier stability matters more than premium savings.
Top Life Insurance Carrier Financial Ratings — June 2026
- Prudential Financial — AM Best A+ (Superior), $3.3T in force, No. 1 in VUL and term life sales
- Pacific Life — AM Best A+ (Superior), strong in VUL, indexed life, and fixed UL markets
- Nationwide — AM Best A+ (Superior), No. 1 in fixed UL with CareMatters II product, VUL top-3
- John Hancock — AM Best A+ (Superior), diversified across VUL, indexed life, and fixed UL
- Protective Life — AM Best A+ (Superior), Classic Choice Term 20 No. 1 selling term product
- MassMutual — AM Best A++ (Superior), $1B surplus notes issued June 2026
- Lincoln National — AM Best A+ (Superior), victorious in STOLI challenge at Third Circuit
- Corebridge Financial (AIG) — AM Best A (Excellent), term life top-5 market share
Related Resources
- How Life Insurance Works: Complete 2026 Guide
- Best Term Life Insurance Without Medical Exam (2026)
- Denied Life Insurance Coverage? What to Do Next
- Life Insurance Beneficiary Mistakes to Avoid in 2026
- How to Find a Lost Life Insurance Policy in 2026
External Authority Sources:
- AM Best Insurance Ratings — Company Financial Strength Search
- NAIC Consumer Resources — Unclaimed Benefits and Policy Locator
- IRS Publication 525 — Taxable and Nontaxable Income (Life Insurance Provisions)
Frequently Asked Questions
What is STOLI and why is it illegal?
Stranger-Originated Life Insurance (STOLI) is an arrangement where investors with no insurable interest in an individual’s life induce that person to obtain life insurance, with the investors funding premiums and collecting most of the death benefit. Courts have consistently held that STOLI violates public policy because it turns life insurance into a wagering contract. The Third Circuit’s June 2026 ruling voiding $8 million in STOLI policies reaffirms this principle under New Jersey law.
Why is premium-financed IUL failing in 2026?
Premium-financed IUL fails because the core arbitrage premise — borrowing at low rates to earn higher returns inside the policy — has broken down. Carriers have reduced caps from the mid-teens to approximately 7–8%, while borrowing costs have risen above 7%. After indexing drag (dividends excluded) and product charges, realistic IUL returns are approximately 3.82% to 4.30%, far below loan costs. At least three dozen cases are currently in active litigation.
Why are VUL sales surging in 2026?
Variable universal life sales rose 15.1% in Q1 2026 compared to the prior year, driven by improving equity market conditions and consumer appetite for investment-linked insurance products. Prudential holds the No. 1 VUL market share at 36.2%, with cash accumulation as the primary pricing objective for 63.4% of sales. Industry analysts expect continued growth through the remainder of 2026.
How can I check if I have unclaimed life insurance benefits?
The NAIC Life Insurance Policy Locator Service is a free tool that allows consumers to search for policies from deceased relatives or forgotten personal policies. Tennessee alone located over $107 million in benefits in 2025. Visit the NAIC consumer website to submit a search request. You’ll need basic information about the deceased person, including their name, Social Security number, and date of birth.
What is the difference between VUL, IUL, and whole life insurance?
Variable universal life (VUL) allows policyholders to invest premiums in market-based sub-accounts, offering growth potential with investment risk. Indexed universal life (IUL) credits interest based on a market index (like the S&P 500) with a cap and floor, offering moderate growth with downside protection. Whole life insurance provides guaranteed cash value growth at a fixed rate, with premiums that never increase and a death benefit that never decreases. Each serves different financial goals and risk tolerances.
What should I do if I’m in a premium-financed IUL policy?
Obtain an independent review from a fiduciary who does not benefit from the policy’s continuation. Key warning signs include collateral demands exceeding original projections, loan balances approaching or exceeding cash values, and zero-crediting years in proprietary indexes. Act before surrender charges become prohibitive or loan balances compound beyond recovery. Valmark CEO Larry Rybka recommends acting “before loan balances rise further, zero-crediting years compound the shortfall, collateral demands increase or surrender charges make exit options more expensive.”
How does the Q1 2026 sales data affect consumers shopping for life insurance?
The sales data reveals important market dynamics: VUL growth suggests strong equity market confidence, while term life and fixed UL declines indicate shifting consumer preferences. For buyers, this means carriers are competing aggressively in the VUL and whole life spaces, potentially offering more favorable terms. However, the premium-financed IUL failures and IUL illustration concerns should give consumers pause before choosing complex products without thorough independent analysis.
Ready to Compare Life Insurance Quotes?
The life insurance industry is rapidly evolving, and choosing the right policy requires understanding both product features and carrier financial strength. Whether you’re looking for affordable term life coverage, permanent protection with cash value growth, or a VUL policy with investment flexibility, comparing multiple carriers and policy types is essential.
Get free, no-obligation quotes today and see how much you could save. Our comparison tool lets you evaluate term life, whole life, IUL, and VUL policies side by side from top-rated carriers including Prudential, Pacific Life, Nationwide, John Hancock, and Protective Life.
Compare Life Insurance Quotes Now →
Why This Matters to Policyholders
The convergence of the STOLI ruling, premium-financed IUL failures, VUL sales surge, and ongoing regulatory scrutiny of IUL illustrations creates a unique moment for consumers. Life insurance remains one of the most important financial tools for protecting your family, but the industry’s product complexity means buyers must be more informed than ever. Stick with straightforward products when possible, verify everything in writing, and never hesitate to seek a second opinion from a fee-only fiduciary advisor.
