Personal Wealth Life Lessons
Bloomberg Personal Finance (02/03) p.72; Geer, Carolyn T.

Consumers should beware that that the current bear market may have not only lessened their retirement savings, but it may have damaged the value of their life insurance policies as well. Experts warn that variable life insurance policies, which became hugely popular during the 1990s boom and are often touted as having high returns, can become dangerous holdings in today's market. Figures show that 10 year ago, variable policies made up only 9 percent of all life insurance premiums, but by 2000, variable policies made up 37 percent of all premiums and displayed estimated sales of $4.3 billion. While variable life insurance policies seem appealing because they lack the guarantees of other life policies and allocate premiums directly to investment funds, experts warn that consumers will still be forced to pay the fees involved in variable life policies, even as their funds wither away. Brokers often emphasize the high yields of variable life policies by showing customers what their returns will be at 12 percent, but often keep silent about the high surrender charges and what will happen to variable life policies if returns are not as high as expected. Often times, customers are forced to sign sales illustrations, pledging that they understand that brokers' sales illustrations are not performance guarantees, and often releasing the insurer from any liability. What is happening today with variable life policies is not unlike the universal life insurance debacle of the 1980s, but experts note that unlike the universal life scandal, today's variable life problems are less likely to qualify for class action status in federal courts.

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