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)
“If the children and youth of a nation are afforded opportunity to develop their capacities to the fullest, if they are given the knowledge to understand the world and the wisdom to change it, then the prospects for the future are bright. In contrast, a society which neglects its children, however well it may function in other respects, risks eventual disorganization and demise.”
—Urie Bronfenbrenner (b. 1917)
“There is not so variable a thing in nature as a lady’s head-dress.”
—Joseph Addison (1672–1719)
“The hero is a mind of such balance that no disturbances can shake his will, but pleasantly, and, as it were, merrily, he advances to his own music, alike in frightful alarms and in the tipsy mirth of universal dissoluteness.”
—Ralph Waldo Emerson (1803–1882)
“What I call middle-class society is any society that becomes rigidified in predetermined forms, forbidding all evolution, all gains, all progress, all discovery. I call middle-class a closed society in which life has no taste, in which the air is tainted, in which ideas and men are corrupt. And I think that a man who takes a stand against this death is in a sense a revolutionary.”
—Frantz Fanon (1925–1961)