Why is it critical for customers to fully understand the sales proposals?

Understanding the sales proposals is crucial for customers because they need to be fully aware that the customer bears investment risk changes. In the context of Variable Universal Life (VUL) or Universal Life Plans (ULP), the performance of these policies can be significantly influenced by the underlying investment choices made by the policyholder. Unlike traditional life insurance policies where the insurer provides predictable guarantees, VUL policies allow for a variable return based on the performance of selected investment options.

This means that while the customer has the potential for higher returns, they also face the risk of fluctuations in the market, which can lead to lower returns or the possibility of losing cash value. It is essential for customers to understand this dynamic so they can make informed decisions about their investment strategies and anticipate how changes in the market may impact their policy's value and coverage.