Recently, a long-time reader of my newsletter came to me for a second opinion financial review. His current financial advisor from Edward Jones had highly recommended a Variable Universal Life Insurance policy as an awesome investment vehicle for his family. 

This reader of mine, I’ll call him Jon, is married with two teenagers. Both are very healthy and will go to college in a few years.

The pitch his advisor made for this product includes: 1) it is very flexible, you can decide when and how much to make the premium payments; 2) you can invest in the stock market through various mutual funds to build up cash value, and 3) with this product, you can achieve tax-free growth of the cash value.

I went over the list of available mutual funds and the one with the lowest expense ratio is the Fidelity VIP 500 Index Fund at 0.35%. About one-third of the funds have an expense ratio higher than 1% however.

For this policy that pays a death benefit of $2mm, Jon needs to pay about $17k per year until he is 70, after that, he can stop paying and the policy will remain valid, according to the policy illustration.

Do you think Jon should buy this VUL policy as an investment or not? If you think the answer is yes, reply and give me three reasons. If it’s no, also give me three reasons. Next week I will share my thoughts.

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