What is a Variable Universal Life Policy?

A variable universal life (VUL) policy provides a death benefit to beneficiaries in exchange for premium payments made by an insured person.

Unlike traditional life insurance, in a VUL, the cash value is invested in what are essentially mutual funds. Meanwhile, the cash value and death benefit of a VUL rise and fall with the stock market.

Unfortunately, a variable universal life insurance policy is rarely an appropriate investment choice. If you inadvertently selected this type of policy due in part to a financial advisor’s misrepresentation of it, seek legal help. A financial advisor negligence lawyer can review your case and determine if you have grounds for pursuing damages. 

What is Variable Universal Life Insurance? 

A VUL policy offers insurance coverage with a savings component. It gives you the assurance that your beneficiaries will be financially protected if you die. At the same time, you can utilize subaccounts that allow you to boost your policy’s cash value. 

With a VUL, you maintain insurance coverage as long as you pay your premium. Your coverage’s death benefit and premiums are flexible. Also, you can choose between a variety of investment options. 

Alternatively, a variable universal life policy is typically very expensive, offers poor investment choices, and does not work as promised. In spite of the fact that you can access flexible premiums, you may have to pay significant upfront policy costs. In addition to these things, you are subject to market risk, and your policy may fail to deliver the returns you want. 

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How does a VUL Policy Differ from Variable Life Insurance?

If you get a VUL, you can make premium payments and invest and grow your policy’s cash value. There is the potential for significant returns on your investment. Conversely, there is substantial investment risk. 

There are opportunities for cash value growth with variable life insurance. Ultimately, your variable life policy’s cash value is based on what you pay for premiums, its expenses and charges, and how various investment options perform. Following your death, your policy ensures that your beneficiaries will receive a certain amount of money. 

Weigh the pros and cons of a VUL and variable life insurance. Let a financial professional help you establish investment objectives. In a situation where you chose a variable universal life policy based on misinformation from a financial advisor, consult with a misrepresentation and/or omissions lawyer, and they can help you take legal action against a liable party. 

Is a VUL a Good Investment?

In theory, the long-term result of a VUL is supposed to be a higher death benefit for your beneficiaries as a result of outstanding investment performance. Yet, in many cases, a VUL is loaded up with charges. As such, it becomes difficult for this type of policy to deliver a positive return.

Comparatively, there are tax advantages with a variable universal life policy. The IRS allows you to withdraw however much you contribute to your policy tax-free. Any withdrawals you make are added to your annual taxable income. 

Evaluate the tax advantages and potential cash value of a VUL with a financial advisor. Ideally, your advisor can provide information about the stock market, the cost of insurance, and other factors relating to your investment.

If your advisor pressures you to invest in a VUL and you lose money, an investment loss recovery lawyer could help you hold this party accountable.  

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How does a Variable Universal Life Policy Work?

Variable universal life insurance represents something more than just a standard permanent life insurance policy. Many factors differentiate this type of insurance policy from others. These include:

Premiums

Your premium payments are split between your policy fees, death benefit, and a tax-deferred savings account. With your policy, you can pay more than the minimum premium, which can boost its cash value. On the other hand, if your policy’s cash value balance is too low, you may have to pay additional premiums to maintain your coverage.

Cash Value

Your policy’s cash value depends on how your investment subaccounts perform. These accounts can include stocks, bonds, and money market funds. You have the freedom to choose your policy’s underlying investment options, which can impact its cash value.

Investment Options

Your subaccounts function similarly to mutual funds. They can range in terms of risk and return. A financial advisor can discuss your investment goals with you and provide insights into what options are available to help you achieve them. 

Investment Risk

If your investments perform at or above the levels you expect, your policy’s cash value will increase. However, there is no guarantee this will happen. If you incur losses, you may have to make steep premium payments to cover your life insurance costs and bolster your policy’s cash value. 

Withdrawals and Loans

You can withdraw money or take out loans as you submit premium payments. Before you pursue these options, connect with a financial professional. They can explain how withdrawals and loans can impact your death benefit and the tax implications of these moves.

Death Benefit

If you pass away, your beneficiaries will receive a tax-free death benefit. A financial professional can answer any questions you have about this benefit. They can help you assess the death benefit of a VUL versus what is provided with other life insurance products. 

There is a lot to consider when it comes to a variable universal life policy. If you were sold this policy but were not informed about other types of life insurance, it may be beneficial to request legal help. At this point, a financial advisor breach of fiduciary duty lawyer can determine if you have a valid case to recover damages. 

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How Can You Get Damages if You Lose Money Due to a Variable Universal Life Policy?

If someone tries to sell you a variable permanent life policy, exercise caution. Regulators have repeatedly warned brokerage firms and consumers about the pitfalls of this type of policy, but people continue to be sold them. If you suffer financial losses due to a VUL, meet with a lawyer to discuss brokerage firm investment loss claims. 

A financial advisor may have promised a VUL would deliver a strong investment performance but failed to achieve the promised result. Along with this, they may have chosen not to tell you about the array of investment options at your disposal. Thus, you could have a compelling case for damages.

Your lawyer prioritizes your case results. They will look for evidence that helps you prove that a financial advisor did not teach you about the level of risk associated with a VUL and ignored relevant investment strategies. Your attorney could help you receive damages that match your policy’s cash value accumulation. 

Trust a Lawyer to Assist You with Your Variable Universal Life Policy Case

As you review life insurance options, you may come across VULs and move forward with one. Your variable universal life policy could prove to be problematic, and you can attempt to collect damages from a financial professional who promoted this option to you in the first place. 

The Meyer Wilson team has more than 75 years of combined legal experience. Tell us about your variable universal life policy case, and we will commit the time and resources to help you with it in any way we can. Schedule a case consultation with us if you have lost more than $100,000.

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