2007-12-23 21:43:40 · 4 answers · asked by Anonymous in Business & Finance ➔ Investing
Whoever is telling you to invest into Variable Universal Life insurance is ripping you off.
This is how a VUL policy works:
1) You pay a premium.
2) A portion of your premium pays for the insurance, and the rest is invested in the market.
3) The internal cost of your insurance goes up, so less of your premiums are being invested as time goes on.
4) At some point of time, your policy may lapse due to inefficient premium payments. To keep the policy enforced, you would have to pay more premiums in the future.
5) If you wanted to take money out, you have to borrow it and pay loan interest on it.
6) If you die someday, you lose your investments in the life policy, but death claim will be paid to the beneficiary.
If I were you, I would stay away from this product. I suggest getting term insurance if you want income protection. For investing, I suggest opening a Roth IRA and invest in mutual funds.
2007-12-24 19:04:19 · answer #1 · answered by Anonymous · 4⤊ 0⤋
Life Insurance companies and banks are the last places to invest. Both have very high fees and in general have mediocre investment products. With Insurance Companies. even if it's a good "mutual fund", the internal fees from the insurance company will significantly hurt the performance.
The so called "insurance" coverage can be achieved for much less via a good term policy (30 year certain, for many, would be the best).
Life Insurance agents get their best commissions from selling;
Variable Annuities
Variable Life
Whole Life
Most of the time these products are sold inappropriately. Be very wary!
2007-12-24 00:22:22 · answer #2 · answered by Common Sense 7 · 4⤊ 0⤋
As an investment, insurance is not particularly good. Insurance policies designed to include an investment primarily benefit the insurance company and the sales person who earns a commission. If you need life insurance, you should buy the cheapest possible policy for the maximum amount of insurance you need. This is either level term insurance or reducing term insurance.
Insurance sales people draw a convincing picture of how much you can benefit from insurance that includes an investment. In every case I can prove that you can do better with term insurance and an alternative investment. Of course, they don't want you to see that proof.
2007-12-23 23:06:01 · answer #3 · answered by Anonymous · 4⤊ 0⤋
Yes it is ok.
Is it a good idea? NO!!!!
You INSURE separately with Term Insurance at a fraction of the cost of VUL. You INVEST in things like mutual funds.
Buy a Term insurance policy for 10- 20% of the cost of the VUL and INVEST the other 80-90% in mutual funds (within an IRA or Roth IRA if this is for retirement).
The only one argument on the PRO side of things is for your agent who will make a very tidy sum.
2007-12-24 01:44:32 · answer #4 · answered by witz1960 5 · 2⤊ 0⤋