Variable universal life insurance is one of the most complicated life insurance products. It is one form of permanent life or cash value insurance that features not only lifetime protection but also asset accumulation.
Variable universal life insurance policy could be a very powerful product that can benefit your family if properly used. But it is not for everyone. There are various kinds of risks associated with it. You should be aware of all those risks before you make the investment. We list some of the risks below.
First, the contract value under variable universal life insurance is not guaranteed. It may be dependent on the investment performance of the cash value. Various charges and fees can greatly affect the contract value. You may be shown the cash value projection under current charges. But the insurance companies reserve the right to increase the current charges up to the maximum, which makes your policy even more uncertain.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, using the cash value either through withdrawals or taking a contract loan may affect your current contract cash value. It can also increase the chance that your policy will lapse. Finally, tax law changes and some of the tax benefits in variable universal life insurance are not guaranteed.
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.