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Variable universal life insurance combines the flexibility of a universal life insurance with the investment account features of a variable life insurance.
Like variable life insurance, variable universal is considered a security. It can only be sold by agents who have passed the National Association of Securities Dealers (NASD) exam.
Answer
Variable life insurance allows you to control your portfolio of investments that is part of the cash value component of a whole life insurance policy. This could include stocks, bonds, or funds. As a result of this freedom, this is the most expensive type of insurance available in the market. Opt for such a policy only if you are completely confident about investing in the markets. While the risks may obviously be higher as there is no guarantee on your savings, the value benefits are also much more than any other insurance policy available.
Answer
Variable Universal Life insurance is permanent life insurance that has a cash value feature in it. The cash value is invested in a small selection of portfolios. Since it is invested, there is no guarantee interest and it may lose value. When you pay your premiums, you are paying for three things: The insurance, the cash value, and investment fees. If you know anything about mutual funds, mutual funds have their own annual operating expenses. Since these mutual funds are invested in a life insurance policy, you are paying more than 5% of annual expenses. Therefore, you will get a low rate of return on your cash value.
Every year, the cost of the insurance goes up. The insurance part of the policy is annual renewable term. That means more of your premiums is going to the insurance and less toward the cash value. Eventually, you will have to pay higher premiums in the future. If you don't, the policy will eventually lapse as the cash value is depleted.
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