Universal Life Insurance: How accurate are these biases?
Hello, my husband is considering universal life insurance and had asked that I help him evaluate it. I have several biases against it, and I was wondering if my assumptions are accurate? I’m asking because I’d like to be effective in helping him as he learns more about this product, and if my assumptions can be validated or invalidated, it will help me greatly in being able to look past them (or feel more confident in knowing they may not be as far fetched as I originally assumed). I’ll take any advice or further reading, too. Just want to get a more accurate understanding of this product. Thank you.
Assumed Pros:
You can access a portion of the cash value at any point in time, for any reason (unlike a Roth, 401k, or other retirement account)
Assumed Cons:
As another Reddit user put it: “The commissions are huge and it gets aggressively pushed by sales people even though it’s rarely a good choice. Just because a product exists doesn’t mean it’s actually a good product. It just means someone has figured out how to make money selling it.”
I’ve seen that it can accrue ~ 2-3% of interest per year, and maybe more depending on variable factors. Compare this to just investing in mutual funds where I can ride the stock market’s growth of ~6-10%.
You’ve got to pay interest on the part of the cash value you take out, because it is labeled as a “loan”.
If I stop putting money into my IRA, I’m not penalized for it. If I stop paying my life insurance premium, the policy could lapse and I could lose what I’ve put into it. So in a way, it seems you’re forced to continue paying ~$8k per year.
TLDR: Are my assumptions about universal life insurance accurate?
