December 26, 2004 07:27 AM
VUL Policies Remind Us Why We "KISS"
Excerpt: The benefit often trumpeted concerning VUL policies is this "tax-free" income provided by borrowing against the policy in future years. In most cases, we believe an investor is better off taking advantage of available tax-deferred retirement plans, Roth IRAs, and investing any remaining funds into a portfolio of high-quality individual common stocks and bonds.
The Variable Universal Life policy, or VUL, is often suggested as a way to save for retirement. A policyholder makes a large initial premium payment, the policy "pays for itself" over time, and once assumed growth rates are applied, the policy is projected to supply retirement income, tax-free, to the holder of the policy. While this sounds like a no-lose situation, many pitfalls exist that can take this strategy and turn it on its head! The Henssler Financial Group (THFG) strongly recommends that investors never purchase a VUL policy to be used in this manner. Let's look into the reasons why.
First, our general approach to insurance should be addressed. THFG generally recommends that most investors purchase term life insurance for any insurance needs that are not permanent. For most, the need for life insurance is highest early in life - after the purchase of a home or especially after the birth of children. If the primary breadwinner were to die at a young age, the surviving family could be financially devastated without insurance proceeds. For this purpose, life insurance is not only a good idea, but also a critical part of a sound financial plan.
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