Although permanent life insurance policies have similar tax characteristics, their investment returns can vary dramatically.
Over the long term, whole life insurance has CD-like investment returns,
IULs (index universal life insurance) have bond-like investment returns, and
VULs (variable universal life insurance) offer the most investment growth potential.
VULs can have stock-like investment returns
if you invest mostly in stock mutual funds or ETFs, although this comes with short-term market volatility.
However, if you invest your VUL cash value mostly in bond mutual funds, bond ETFs, or structured index strategies,
your VUL will perform like an IUL. We all know that stocks perform much better than bonds and CDs over the long term.
Thus, if used properly, VUL can beat IUL and whole life by a big margin over the long term. Note that all life insurance policies have
insurance cost, and their investment performance should be measured on after-cost and after-tax basis. This is also true when
comparing them against investments in taxable accounts, where
tax cost
may exert a significant drag on performance, depending on your tax bracket.
It is fair to compare their after-cost and after-tax returns,
which may differ by hundreds of thousands of dollars in the long term.
To see which strategy would benefit you the most, we provide free data analysis to help you make a decision.
In addition, we may suggest a diversified portfolio with appropriate asset allocation
based on your risk tolerance and investment profile. We may also help you with dollar-cost averaging and portfolio rebalancing.