The Investment Scientist

A few weeks ago, I told you about Jon, a long-time reader of my newsletter. His Edward Jones financial advisor was trying to sell him a Variable Universal Life (VUL) policy, and he asked me for my 2nd opinion. Instead of writing my opinion, however, I posted his question to my newsletter readers, and asked you guys to make an assessment. 

A few of you came back with the answer of YES since the $2mm death benefit is huge, and the annual premium payment of $17k appears to be quite reasonable. On top of that, the buyer gets the flexibility to skip payments as well. I believe this view of the product is exactly what the insurance company wants but it is misguided.

To answer Jon’s question, I first talked to him to determine his family’s actual need for life insurance. He has two teenage kids and he and his wife already both have 20-year term life insurance policies, each with a $2mm death benefit. They clearly have no need for additional life insurance.

Now let’s look at the product itself. A VUL policy is a combination of two components – life insurance and investment. The product is not entirely under the oversight of the SEC, therefore there is a huge regulatory loophole that the insurance company can use to take advantage of the buyers.