Do you have a spouse and/or children depending on your income if you were to die? Would anyone be financially harmed if you were to pass away? If the answer to both questions is no, then you probably don’t even need life insurance. However, if you have a spouse, kids, parents or others depending on your income, being without the proper life insurance plan is very likely a huge mistake.

Variable Universal Life Insurance

Many types of cash-value products have been available over the years. A couple of these types of plans are whole life and universal life insurance. In most, if not all whole life and universal life insurance plans, your excess premium dollars (monies you paid that weren’t needed to pay for insurance costs and expenses) were invested with that particular insurance company. These policies have historically offered very poor returns. Because of this, they weren’t good for the policyholder.

However, a relatively new (by insurance industry standards) type of cash-value insurance has come on the market called variable universal life insurance or VUL.

VUL takes the good of traditional universal life insurance, which is giving the consumer the flexibility of when to make payments, and couples it with the flexibility of allowing the consumer the benefit of determining where to invest the excess premium dollars into mutual fund-like sub-accounts.

Most of these plans have numerous mutual fund-like sub-accounts that you can switch around in, (usually without a charge), such as stock, bond or money market type accounts.

These accounts give VULs the opportunity to earn returns that have seldom been seen in other permanent life insurance plans. The choices you make here can mean the difference of thousands, if not hundreds of thousands of dollars over the life of the plan.

Be aware however, that since the insurance company doesn’t guarantee the cash value that supports the VUL insurance, it’s possible to lose money on the investment portion.

Of course, like other permanent insurance plans, the cash value grows tax-deferred, meaning that you pay no tax as your money compounds. An added benefit of the VUL is that many charge virtually no interest on policy loans taken after a certain period of time!

There are numerous VUL plans on the market today. How can you determine which plans are possibly best for you? Look at the expenses involved in the product, such as management and cost of insurance. The lower these costs are, the more dollars are usually generated for you.

However, I believe you must find a balance between these expenses and the other important consideration, which is what sub-accounts are offered for investment. You don’t help yourself much if the VUL you choose is inexpensively run, but offers below average investment choices.

To summarize, (and generalize) it is possible with the right VUL plan, you may have the opportunity to get great returns, tax-deferred growth and tax-free zero interest loans!

Final thoughts

Insurance companies usually require that you to pass a physical before issuing a policy however, don’t buy a life insurance plan that requires physicals after the initial one. Because if you’re asked to take physicals at the insurance company’s discretion, the onus of staying healthy so you can stay insured rests with you. And if you somehow knew in advance that you could pass future physicals, you wouldn’t need the life insurance in the first place.

Make sure your insurance company is financially sound

Be sure to check with a good insurance rating service to make sure the insurance company you are buying from is financially strong. Also, if you’re thinking about replacing your old insurance policy, never cancel it until the new one is in force.

If you need life insurance, don’t wait

Waiting to buy the right life insurance plan can be a mistake because the older you get, the more it will cost you. More importantly, if you become uninsurable while you’re waiting, it can’t be purchased at any price.

Variable Universal Life Insurance is not for everyone who needs life insurance
Please check out my Term Life Insurance Advice hub for more information on the cash-value alternative; term life insurance.

Financial Planning For Retirement

Investment Advice

Retirement Investing

Term Life Insurance Advice

Disclaimer:

In an attempt to provide the reader with accurate information, material has been obtained from sources believed to be reliable; however, the accuracy and completeness, and the opinions based thereon, are not, cannot and will not be guaranteed.

All examples in this text are hypothetical. Any negative statements or criticisms of individuals or organizations is unintentional. The information contained in this text represents the opinion of the author and is to be accepted as opinion only. It is not intended to provide legal, accounting or financial advice for individual readers.

Each individual's financial needs are different. This text is not meant to be utilized as a substitute for a sound financial plan. An individual financial plan should be developed only after consultation with a qualified professional.