The pros and cons of Variable-Universal Life Insurance

A Brief Overview of Variable-Universal Life Insurance:

Variable Universal Life Insurance blends the features of Variable Life and Universal Life, offering a choice of underlying investment accounts, flexible premiums and adjustable death benefit. The amount of the death benefit may rise or fall, depending on the success of the underlying investments you choose. Because the stock market has traditionally performed well over long periods,this offers the opportunity to build up significant cash value. However, if you die when values are down, these policies guarantee that a minimum death benefit will still be paid to your beneficiaries. This policy gives you the most control of the cash value portion, which means that the policyowner assumes all the risks inherent in the underlying securities investments. Variable-Universal Life products are therefore regulated by Federal securities laws and the SEC, and must be sold with a prospectus.

Pros:

Variable-Universal Life offers premium and death benefit flexibility, as well as the potential to increase cash value based on the performance of your choice of underlying funds. Because it is tied to the performance of various securities markets, it may provide an important hedge against inflation. This can help keep the value of your life insurance policy from eroding due to rising costs of living. It also allows you to withdraw money or to borrow from the policy during your lifetime. Better for younger policyowners with long-term investment horizons.

Cons:

Variable-Universal is more expensive than other types of Permanent Life Insurance. Premiums must be high enough to cover the cost of insurance, mortality and expense charges, and expenses associated with the underlying funds. You must have at least a basic understanding of stocks, bonds and securities. You must read and understand the prospectus before investing. You will be responsible for managing the underlying investment accounts.  The policy’s success is dependent on the investments you make, and may lose value.