What is a Variable Universal Life Policy?
For over 30 years, insurance companies have been selling “variable
universal life,” or VUL policies to their customers. Our law firm
has handled many cases involving these products over years. In our opinion,
VULs are rarely, if ever, an appropriate investment choice. In fact, VULs
are typically very expensive, offer poor investment choices, and do not
work as promised.
Like traditional life insurance, VULs provide a death benefit to beneficiaries
in exchange for premium payments that are made on behalf of an insured
person. Unlike traditional life insurance, in a VUL the cash value is
invested in what are essentially mutual funds, and the cash value and
death benefit of a VUL rises and falls with the market.
In theory, the long-term result is supposed be a higher death benefit for
your beneficiaries as a result of investment performance. In most cases,
however, because VULs are loaded up with so many fees, it’s very
difficult for these products to achieve a positive return.
In many cases that our law firm has seen, investors are asked to pay significant
premiums up front or over a course of several years. They are also assured
that the VUL will ultimately pay for itself once the cash value grows
to a certain value. This almost never works out as promised. Instead,
after having dumped considerable amounts of money in the VUL, most investors
find that cash value does not achieve sufficient returns to pay the premium.
The investors must then either deposit even more money into the policy,
above and beyond the stated premiums, just to keep the policy afloat.
Over time, more often than not, the investor finds that the VUL is simply
unsustainable, and they often have no other choice but to surrender the
policy at a loss.
Regulators have repeatedly warned brokerage firms and consumers about the
many pitfalls of VULs, and have disciplined brokerage firms and their
salespeople for misrepresentations and unsuitable sales of VULs to their
customers. Unfortunately, these problems still persist.
If someone is trying to sell you a variable universal life insurance policy,
we strongly encourage you to exercise extreme caution before putting any
money into such a product. If you’ve been sold a VUL and have questions
or concerns about your investment, please give us a call today for a
no-cost evaluation by one of our experienced investment fraud attorneys.