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If you have a Variable Life Insurance product (“VAL”) you should know the following:
Variable life insurance products tend to be expensive, with high commissions and
expenses. The total return after subtracting costs often makes such policies less
attractive when compared with other options.
The premiums on a variable life insurance policy will eat into the gains you could make
from the money you are paying.
Unlike contributions to retirement accounts and some college savings plans, the premiums
are not deductible.
Withdrawals from a variable life policy will reduce the death benefit.
If you withdraw more money than the premiums you paid into the policy, you will pay
income taxes on the difference.
Withdrawals from a variable life policy may cause the insurer to move a portion of the
remaining balance into a fixed-return account to minimize the company's risk. This is
more likely to occur when the insured borrows against the policy, but it can also happen
when the insured withdraws funds from the policy.
If you die prematurely, your heirs lose the value of the investment account, getting only
the death benefit.
The claims that one can withdraw contributions without penalty is not strictly accurate,
since the surrender charges penalize you for withdrawing funds before the 13th year.
If you bought a VAL and were not aware of these limitations, risks and costs associated with
the VAL, you may have a legal case you can bring against your advisor. Call or email us for a free consultation on your rights. The Hayes Law Firm at (713) 862-2152 or
dhayes@dhayeslaw.com.
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