• Albert Lee, CONTRIBUTOR
  • Graduated UCI with Business Major. I love history and finances.
  • Opinions expressed by Sunpath Contributors are their own.
March 21, 2018 views: 30,239

The “inbetweener” policy. More expensive than a Universal Life, but cheaper than a Whole Life. Why is that? The reason why it’s called a Variable Universal Life Insurance Policy, is because there is cash value and invested in the stock market and that the face amount can change. Because the policy holds a separate account that is actively or passively invested. A part of the premium is not just the cost of insurance, but also a combination of a forced savings account that will be invested in the stock market.

So what are the Pros and Cons of Variable Universal Life Insurance?

Pros:
The most efficient way to grow money in a permanent life insurance policy. As you can actually choose which investment to go with, rather than sticking all of your money into one, individual company.
All investment growth is non-taxable until withdrawn, otherwise known as tax-deferral growth.
Policy loans are very favorable to the customer, because essentially you’re loaning money to yourself. And if certain rates of return in the stock market are achieved, there may be no need to pay loan interest, in some cases, people have taken loans and never had to pay interest or principal.***
The cash value helps keep the policy in pace with inflation. That way a $100,000 policy now will hopefully be worth $100,000 in that future’s dollar.

  • I.E. $10,000 dollars is 1960 would be worth $79,868 dollars in today’s dollars.
These policies can be overfunded and have more money invested in the stock market, and can be used as an alternative source for investing money.
You have the option of paying up this policy as well. But premiums are also higher.
You can reduce the cost of these policies by not adding a variable death benefit.
Cons:
Still relatively expensive, but it is a forced savings plan. If you overfund the policy, it would be just as expensive as the Whole Life policy, as you are overpaying on the policy.
There is a list of mutual funds that you can use, and in some cases, only 20 to 25 mutual funds are available for the policy.
Loans on these policy can grow at an exponential pace if interest isn’t paid and the rate of return isn’t high enough to cover the loan.***
If taken as a withdrawal, all earnings are taxable.
There is no guaranteed cash growth.
If taken with a fixed death benefit, if a policy was bought for $100,000 and had grown $10,000 inside, the death benefit would not be $110,000, but $100,000.

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