Risks of Variable Universal Life
- Cost of insurance - the cost of insurance for VULs is generally based on term rates and as the insured ages, the risk of mortality increases, increasing the cost of insurance. If not monitored properly the cost of insurance may eventually exceed the cash outlay depleting savings. If this continues long term the savings will be depleted and insured will be given an option to increase the cash outlay to cover the higher cost of insurance or cancel the policy leaving them with no savings and either no insurance, or very expensive insurance.
- Cash outlay - the cash needed to effectively use a VUL is generally much higher than other types of insurance policies. If a policy does not have the right amount of funding, it may lapse.
- Investment risk - because the sub accounts in the VUL may be invested in stocks and bonds, the insured now takes on the investment risk rather than the insurance company.
- Complexity - the VUL is a complex product, and can easily be used (or sold) inappropriately because of this. Proper funding, investing, and planning are usually required in order for the VUL to work as expected.
Read more about this topic: Variable Universal Life Insurance
Famous quotes containing the words risks of, risks, variable, universal and/or life:
“The question is whether personal freedom is worth the terrible effort, the never-lifted burden and risks of self-reliance.”
—Rose Wilder Lane (1886–1968)
“The amount of it is, if a man is alive, there is always danger that he may die, though the danger must be allowed to be less in proportion as he is dead-and-alive to begin with. A man sits as many risks as he runs.”
—Henry David Thoreau (1817–1862)
“There is not so variable a thing in nature as a lady’s head-dress.”
—Joseph Addison (1672–1719)
“There is an universal tendency among mankind to conceive all beings like themselves, and to transfer to every object, those qualities, with which they are familiarly acquainted, and of which they are intimately conscious. We find human faces in the moon, armies in the clouds; and by a natural propensity, if not corrected by experience and reflection, ascribe malice or good-will to every thing, that hurts or pleases us.”
—David Hume (1711–1776)
“All my life I’ve looked at words as though I were seeing them for the first time.”
—Ernest Hemingway (1899–1961)