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 to 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.