Individuals drawn to variable universal life insurance should be aware of several pitfalls:

1) Neglecting to Monitor

A VUL policy is not a passive product. Failing to track subaccount performance or changes in insurance charges can lead to unexpected cash value declines, forcing you to inject more money into the policy to avoid lapsing. Regular reviews can help you detect such issues early.

2) Paying Only the Minimum Premium

While it might be tempting to pay just enough to keep the policy afloat, this approach can cause your cash value to stagnate, especially if subaccount returns are modest or negative. Over the long term, the risk of lapse climbs significantly.

3) Over-Reliance on Illustrations

Policy illustrations often show future values based on certain assumed rates of return. While helpful for planning, they are not guaranteed outcomes. Real market performance can deviate widely from these assumptions, leading to different policy results than anticipated.

4) Excessive Policy Loans or Withdrawals

Although accessing your policy’s cash value can be beneficial, tapping it too aggressively can decimate the death benefit, possibly trigger tax consequences, and even cause a policy to collapse if not managed properly. It’s important to maintain a prudent approach to policy loans or withdrawals.