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Just realized I have a VUL--what should I do?
Old 01-20-2007, 02:54 PM   #1
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Just realized I have a VUL--what should I do?

I was reading in another thread about how VULs are such bad investment vehicles when I remembered that I own one. It was something my mother setup for me many years ago, and I just continued to pay the premiums because I really knew nothing about it. After doing some cursory research I've learned enough to know that I probably shouldn't invest another dime in it since I haven't maxed out my 401k yet. So, is the best plan to just let it lapse? The premium isn't tremendously high (about $30/month), not high enough for me to want to learn the intricacies of how VULs work, so I wouldn't be heartbroken if I walked away from it.

Suggestions?
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Re: Just realized I have a VUL--what should I do?
Old 01-20-2007, 04:04 PM   #2
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Re: Just realized I have a VUL--what should I do?

When does it get cash value - i.e. when can you get some money back? I don't know much about these (since I learned early on they were a bad deal), but if you only have to make a few more payments before it has "cash value", it might be worth it not to let it lapse.
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Re: Just realized I have a VUL--what should I do?
Old 01-20-2007, 10:40 PM   #3
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Re: Just realized I have a VUL--what should I do?

If it's been in place for a lot of years, you probably have some decent cash value built up in it. VUL, like all life insurance, is age-based, which is why the premium is pretty low.

Get out a recent statement. That should tell you how much the CV is worth. Don't know your age, but for $30 a month you might be able to get up to $500,000 in term life for the same premium............

You could take the CV, and invest in a low-cost mutual fund, use the $30 to buy a big chunk of term, and you kill two brids with one stone...........
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Re: Just realized I have a VUL--what should I do?
Old 01-20-2007, 10:47 PM   #4
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Re: Just realized I have a VUL--what should I do?

Quote:
Originally Posted by FinanceDude
If it's been in place for a lot of years, you probably have some decent cash value built up in it. VUL, like all life insurance, is age-based, which is why the premium is pretty low.

Get out a recent statement. That should tell you how much the CV is worth. Don't know your age, but for $30 a month you might be able to get up to $500,000 in term life for the same premium............

You could take the CV, and invest in a low-cost mutual fund, use the $30 to buy a big chunk of term, and you kill two brids with one stone...........
Thanks for the input. It's a $60k policy, and according to the latest statement, it's got about $4k in cash value with no surrender charge. Looks like the policy was opened in 1991. If I cash it out, will it just be taxed as normal income? Also, any reason not to dump it into a Roth instead of a MF?
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Re: Just realized I have a VUL--what should I do?
Old 01-21-2007, 09:43 AM   #5
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Re: Just realized I have a VUL--what should I do?

What does VUL stand for? I'm guessing some sort of annuity
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Re: Just realized I have a VUL--what should I do?
Old 01-21-2007, 10:15 AM   #6
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Re: Just realized I have a VUL--what should I do?

Quote:
Originally Posted by rjpatt
What does VUL stand for? I'm guessing some sort of annuity
Variable Universal Life..........it's a life insurance policy with two components...........a life insurance policy mated with an investment component.
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Re: Just realized I have a VUL--what should I do?
Old 01-21-2007, 03:57 PM   #7
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Re: Just realized I have a VUL--what should I do?

In general you will be able to replace the $60K of insurance for a lot less than $30 per month. There's a number of on line term insurance pricing sites.

If you need insurance I'm willing to bet the $60K isn't close to what you really need. If you don't need insurance stop paying for it. Take your money and run.

I don't think you have the option of "rolling over" a VUL but the $4K would make an annual contribution to a Roth.



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Re: Just realized I have a VUL--what should I do?
Old 01-21-2007, 05:16 PM   #8
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Re: Just realized I have a VUL--what should I do?

Am I correct in saying that it's 15 years of payments? at $30/mo?
12months X 30=360/yr. X 15 yrs=$ 5400 AND you will receive a return of $4000?.......
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Re: Just realized I have a VUL--what should I do?
Old 01-21-2007, 05:30 PM   #9
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Re: Just realized I have a VUL--what should I do?

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Originally Posted by mountaintosea
Am I correct in saying that it's 15 years of payments? at $30/mo?
12months X 30=360/yr. X 15 yrs=$ 5400 AND you will receive a return of $4000?.......
Yeah, that's one of the reasons not to get one. Too bad my mother didn't know that at the time. Like I said, I don't know much about them, but I think the reason it's only $4k is that 1) the fees are enormous compared to regular mutual funds, and 2) it's an equity fund, so value can go up or down depending on the market.
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Re: Just realized I have a VUL--what should I do?
Old 01-21-2007, 05:33 PM   #10
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Re: Just realized I have a VUL--what should I do?

Quote:
Originally Posted by CompoundInterestFan
Yeah, that's one of the reasons not to get one. Too bad my mother didn't know that at the time. Like I said, I don't know much about them, but I think the reason it's only $4k is that 1) the fees are enormous compared to regular mutual funds, and 2) it's an equity fund, so value can go up or down depending on the market.
The tech bubble not withstanding, the last 15 years were some of the best 15 year periods in our stock markets history -- based on S&P500 returns.
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Re: Just realized I have a VUL--what should I do?
Old 01-21-2007, 05:57 PM   #11
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Re: Just realized I have a VUL--what should I do?

Quote:
Originally Posted by 2B
The tech bubble not withstanding, the last 15 years were some of the best 15 year periods in our stock markets history -- based on S&P500 returns.
Yeah, that's what I was thinking as well, so I went back and checked out the policy statements. It turns out that even though the policy inception date was 1991, it looks like it was converted from an Appreciable Life policy to a VUL in 1998. When it was converted in '98, the cash value was $0, so that explains a little better why the value's only $4k. Total premiums paid into since '98 = $30/mo X 12 X 8 = $2880.

In any case, I plan on cashing it out and dumping as much as possible into my Roth. I also plan on shopping around for some cheaper life insurance as well. Thanks everyone for their help with this.
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