Mike’s Life Insurance Advice

Dear Randall,

That’s a great question. In a nutshell, a variable universal life insurance policy does offer you much more flexibility than a standard whole life insurance policy. And, as you surmised, there are substantial risks involved.

This type of insurance policy offers you a lot of flexibility. That’s because after you’ve made your initial payment you choose when to make additional payments as well as the amount you want to pay. But although your payments are flexible they still are subject to specific maximum and minimum amounts.

And if you don’t make any payments your policy will be in effect for as long as you have enough cash value in it to cover your monthly insurance charges.

Depending on your aversion to risk, you can invest your premiums into one or more of the investment portfolios that the plan offers. These investment portfolios offer you the potential for long term growth combined with tax deferred earnings. You can also make tax free transfers from one portfolio to another.

You also have a choice of death benefits. You can provide a level benefit that equals the original face amount of your policy or you may opt for a variable benefit. The variable benefit will be the original face amount of the policy and your policy account value.

What are the Advantages of a Variable Universal Life Insurance Policy?

There are three major benefits that a variable universal policy offers.
1. Because you have so many different investment portfolios to choose from you have the greatest potential for growth – more than with any other kind of life insurance policy.

2. Within limits you determine when you make your premium payments and the amount you pay.

3. You have the flexibility of increasing or decreasing the face amount of your policy.

What are the Disadvantages of a Variable Universal Life Insurance Policy?

Risk goes hand-in-hand with the flexibility this plan offers.

1. If you make poor investment choices you may have to increase the amount you pay in premiums.

2. If your investment choices do not perform as you anticipate it is possible that your insurance policy will lapse.

3. You run the risk of having problems funding your policy because of the flexibility it permits. Since you can skip payments and may experience negative returns there is the potential of losing the money you have invested along with the insurance coverage that you want.

Because of the inherent risk involved with this type of an insurance program it would be in your best interest to consult with a qualified professional before making your investment. And make sure to read the prospectus in its entirety. Also be sure to have all of your questions answered before investing or sending any money.

Hope that gives you a bit more insight into this insurance product.

Mike