What are the risks associated with VUL policies compared to other insurance products?

Variable Universal Life (VUL) policies are distinct from traditional life insurance products because they combine a death benefit with an investment component that is subject to market fluctuations. This means that the cash value of a VUL policy can increase or decrease based on the performance of the selected investment options, such as mutual funds.

The correct answer highlights the greater investment risk inherent in VUL policies, emphasizing that premiums can vary depending on the performance of these underlying investments. As market conditions change, so too can the policy’s cash value and, by extension, the cost associated with maintaining the policy. This variability means that policyholders must be aware of the potential for lower returns during market downturns and the impact this can have on their overall investment strategy within the policy.

In contrast, other insurance products, such as whole life insurance and term life insurance, typically offer more stable premiums and guaranteed death benefits without exposing the policyholder to the same level of market risk as a VUL. Therefore, understanding this key difference helps policyholders make informed decisions about the type of life insurance that best suits their financial goals and risk tolerance.