Combination of death benefit and accumulated cash value is characteristic of all permanent life insurance. Variable universal life insurance is one form of permanent life.
Variable universal life insurance is the most flexible permanent life insurance. You can decide how you pay the premiums, and how you want to allocate the cash value among many funding options. But in order to decide if variable universal life insurance meets your need and financial situation, you need to understand the risks of the product. Below we will discuss some of the major risks. You can find more information in Variable Universal Life Insurance Decode website.
First, because the performance of the separate account depends on the investment option, the cash value is not guaranteed. The product fees and costs also can change, up to the maximum, which may be different from when you purchased the policy.Second, variable universal life insurance is designed for long term benefit. Using it as a short-term investment can make your policy lapse or you will not accumulate the amount of cash value as you expected. Third, although variable universal life insurance offers great flexibility in paying premium, making withdrawals, and taking contract loan, all of these can increase the chance that your policy will lapse if it is not properly done. Finally, the tax benefits of variable universal life insurance are under the shelter of the policy being a life insurance policy under certain guild line tests. If the policy failed the tests, you may have tax liability.
After all, you should always be aware of both the benefits and the risks of variable universal life insurance products. Then based on your goal and situation, you can decide if it is a good investment for your family.
