What are some Pro's & Cons of Equity Index Universal Life Policy's?

Question

What are some Pro's & Cons of Equity Index Universal Life Policy's?

Answer 1

Don't mix investing with insurance.

Answer 2

I can think of only one argument, why you would want to buy such a life insurance policy. Such an insurance policy gives you coverage for your entire life. You can use it as part of your estate planning, which makes only sense in my mind if you have a lot of money to pass on to your heirs.

The biggest con is that the (hidden) commissions are very high, which is why the insurance company and the insurance sales rep have an incentive to sell you such a policy. If you don't believe this, ask your insurance agent how much the commission is for the first premium and for each subsequent premium. (See how he or she reacts. In any case, the insurance agent has to tell you. Have him or her give you the commission in writing just in case.)

You can do much better if you get a term life insurance and invest money in an index fund on your own. A term life insurance coverage for 20 years or 30 years is long enough for most people.

Shop around for a term life insurance and compare the premium for such a term life insurance with the premium of the  universal life insurance you are thinking about getting. Then buy the term life insurance and calculate the savings you have for not paying the higher premium for the universal life insurance. Put these savings into a stock index fund at Vanguard anytime you pay for your term life isurance. This will give you almost the same result as an equity index universal life insurance policy for a fraction of the cost. (The only difference is that your life insurance coverage will expire when your term life insurance expires.)