The 2008 “market shock” may have an unwelcomed delayed effect on variable life insurance policies according to an article recently posted by the Wall Street Journal. Variable life insurance usually refers to variable universal life or VUL.
One key point is the policy holder may only get 30 or 60 days notice that the policy requires more money. Another interesting point was that estate advisers should consult a good life insurance agent.
Edward F. Koren, chair of private wealth services at Holland & Knight in Tampa, Fla., also recently helped a client deal with a troubled policy. Because the policies are complicated, he says, an estate adviser should turn to a very good insurance agent for help. “You need someone who deals with insurance every day,” says Koren.
That advice goes for financial advisers as well. They may sell life insurance on the side, but it’s doubtful they keep up with it full time. Get a second opinion by contacting an independent life insurance agent and broker; it never hurts.
A variable life insurance policy owner, or any universal life policy holder, should request from their carrier a current illustration to see how a policy is performing. A current illustration is much more clear picture of a life insurance policy than an annual statement.
I don’t recommend variable life insurance. It poses too much downside risk to the client, and puts too many eggs in one basket. Life insurance should be a more conservative element to an overall estate plan. There is guaranteed universal life that guarantees coverage to age 121 at a fixed rate. Also there are universal life products with strong guarantees that build cash value. Besides now there is indexed universal life that correlates to market performance but has a floor against market losses and is not directly involved in the stock market.
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