Are Variable Universal Life insurance policies (VULs) a good deal and if so, under what circumstances?
Steve Answer: VULs, in which cash values are invested in mutual fund-like “separate accounts,” can be a good deal only if they are held until death when any taxable gain that would apply on surrender (assuming investments have done well) disappears. We rather prefer cheap term life insurance policies and low-cost mutual funds, because they are easier to understand and because the array of commissions, fees, insurance charges (often higher than term), and asset charges for the insurer’s investment management and profit can take away a lot of the VULs vaunted tax advantages. Ameritas has an excellent low-load VUL. Best use of a VUL is when the policy is held until death and the money is withdrawn, by partial withdrawals and low-cost loans, during retirement. Jim Hunt, CFA Question: Why should I buy a permanent life insurance policy? Patrick Answer: You should stick to term life unless he can afford the insurance he needs in a permanent policy, or he has maxed out on his 401(k)s, 403(b)s
