Variable Universal Life Insurance - The Pros And The Cons
How would you like insurance protection combined with the ability to make a substantial amount of money? If so, a variable universal life insurance policy could be what you're looking for because it offers you a combination of insurance protection along with an investment opportunity.
Although you will get the same premium flexibility that a universal life insurance policy offers, you will also enjoy a broader range of investment choices than are available elsewhere.
An Overview of Variable Universal Life Insurance
This type of insurance policy offers you a lot of flexibility. Once you've made your initial payment you can then make additional payments in any amount and at any time you want. However, 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 along with tax deferred earnings. You also can enjoy the flexibility of making tax free transfers from one portfolio to another.
And your options don't stop there because you also have a choice of death benefits. Either 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.
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