Why is proper management of a VUL policy crucial for the policyholder?

Proper management of a Variable Universal Life (VUL) policy is crucial for the policyholder primarily to maximize benefits and prevent policy lapse. This type of policy combines life insurance with a cash value component that can be invested in various options, which adds a layer of complexity.

When managed effectively, a VUL policy can offer significant advantages, such as growth of the cash value based on the performance of selected investment options, flexibility in premium payments, and the ability to adjust the death benefit. By actively managing the policy, policyholders can make informed decisions about investment allocations that align with their financial goals and risk tolerance.

Furthermore, regular monitoring of the policy's performance and addressing any premiums, deductions, or investment changes can prevent the policy from lapsing. If the cash value becomes depleted due to poor investment performance or insufficient premium contributions, the policy could terminate, resulting in a loss of insurance coverage and accrued benefits. Thus, comprehensive management is essential to ensure that the policy remains in force and continues to meet the policyholder's needs over time.