Buying Variable Universal Life (VUL) insurance is not like picking out a phone plan or buying a new pair of sneakers. It’s a complex financial product that combines lifelong insurance protection with investment options—and it deserves your full attention before signing on the dotted line.
If you’re seriously considering a VUL policy, one of the most important steps is speaking with a licensed insurance agent. But what should you ask? What do you really need to know to make an informed decision?
This guide highlights five critical questions you should ask before purchasing a VUL policy. These questions will help you avoid future regrets and make sure the policy truly fits your long-term goals.
My First VUL Meeting—What I Wish I Had Known
I still remember the day I sat down with my first insurance agent. I was 30, eager to start “adulting,” and convinced that I needed to start building a solid financial plan. The agent was charismatic, the presentation was polished, and the illustrations looked too good to pass up. But you know what I didn’t do?
I didn’t ask the right questions. And that oversight cost me in the form of unexpected fees, confusion about performance, and a few late-night panic sessions when I realized my cash value was not where I expected it to be.
So, here’s your chance to avoid my mistakes.
1. What Are All the Fees Involved in This VUL Policy?
VUL policies come with layers of fees—some obvious, some hidden in the fine print. Ask your agent to list and explain each one clearly. Common fees include:
- Cost of Insurance (COI): This increases with age and affects your policy’s sustainability.
- Administrative Fees: These cover policy maintenance and can be fixed or percentage-based.
- Fund Management Fees: These apply to the investment component, and they vary depending on the fund selected.
- Surrender Charges: These are penalties for withdrawing or canceling your policy early.
Why this matters: Even strong investment returns can be eaten away by fees if you’re not paying attention. Knowing the total cost structure helps you compare VUL against other investment or insurance options realistically.
2. What Investment Options Are Available, and How Do They Work?
Since part of your premium goes into investment sub-accounts, it’s important to understand what those are. Ask your agent:
- How many fund options are available?
- What types of funds (e.g., equity, bond, balanced, global) can I choose from?
- Can I change my allocation later?
- What historical performance do these funds have?
Personal tip: When I saw the fancy charts, I assumed high returns were guaranteed. They’re not. VUL investments are tied to the market, and while the potential for growth is real, so is the risk of loss.
3. How Flexible Are the Premiums and Death Benefit?
VUL insurance is often praised for flexibility, but this flexibility comes with responsibility. Ask:
- Can I skip or lower premium payments if times get tough?
- What happens if I overfund the policy?
- Can I increase or decrease the death benefit over time?
Why this matters: The ability to adjust payments may be useful if your income fluctuates, but it also means your policy could lapse if the cash value runs too low. Flexibility is only beneficial if you understand how to manage it properly.
4. Can You Show Me a Policy Illustration With Conservative Assumptions?
Policy illustrations are charts that show how your VUL might perform over time based on certain assumptions. But here’s the catch: many illustrations use optimistic growth rates (like 8%–10%).
Ask for a version with conservative projections (around 4%–6%) and include all relevant fees. Then, request side-by-side comparisons to see how market performance affects your long-term results.
Why this matters: A rosy picture might tempt you, but reality doesn’t always match predictions. Conservative illustrations prepare you for a range of outcomes, including years where returns may be negative.
5. What Happens if the Policy Lapses?
This is a big one—especially for VULs. Because the policy depends on investment performance and sufficient cash value to cover insurance costs, it can lapse if the numbers don’t add up.
Ask your agent:
- What triggers a policy lapse?
- How much warning will I receive before a lapse happens?
- Can I reinstate a lapsed policy?
Personal reflection: One of my friends stopped funding his VUL thinking it would “just float” on investment returns. A market downturn and rising insurance costs drained his cash value, and his policy lapsed silently. Years of effort—gone. Don’t let this happen to you.
Final Thoughts: Empower Yourself with Questions
Agents aren’t trying to trick you—but it’s their job to sell. Your job is to protect your financial future by asking smart, direct questions and insisting on clear, straightforward answers. Don’t be afraid to slow down the process, take notes, or get a second opinion.
And remember: VUL is not for everyone. It may be a great fit if you have long-term investment goals, need permanent coverage, and are comfortable managing market-related risk. But only if you understand what you’re buying.
Disclosure: Not All VULs Are Created Equal
Every insurer offers different terms, benefits, fees, and investment options. The information above serves as a general guide, but always verify with your agent and read the product brochure. Terms vary from one country to another, from one product to another, and from one insurer to another. Consult a licensed financial advisor for advice tailored to your situation.
Key Takeaway
Before committing to VUL insurance, come prepared with the right questions. Your future self—and your financial health—will thank you.
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