Variable Universal Life Insurance Risks
Variable universal life insurance is one of the most complicated life insurance products. It is one form of permanent life or cash value insurance that features not only lifetime protection but also asset accumulation.
Variable universal life insurance policy could be a very powerful product that can benefit your family if properly used. But it is not for everyone. There are various kinds of risks associated with it. You should be aware of all those risks before you make the investment. We list some of the risks below.
First, because the performance of the separate account depends on the investment option, the cash value is not guaranteed. The product fees and costs also can change, up to the maximum, which may be different from when you purchased the policy.Second, variable universal life insurance offers great tax benefits. However, its cost and charges are also high compared with term life insurance. If you purchased the variable universal life insurance for short term usage, it may be worse than buying a term life and invest the difference. Third, using the cash value either through withdrawals or taking a contract loan may affect your current contract cash value. It can also increase the chance that your policy will lapse. Finally, tax law changes and some of the tax benefits in variable universal life insurance are not guaranteed.
There are still other major risks associated with variable universal life insurance products. You need to be cautious about these risks before you make the investment.
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