What is easy money policy also known as?

Can I owe MORE money to the insurance company for a high surrender charge on a variable life insurance policy?

• I'm deeply stressed and worried that I may have been duped into enrolling in a variable life insurance policy with AXA. Essentially the premise sounded pretty good, but that's a whole 'nother story. I enrolled in it primarily as an investment vehicle to make money in the long run, maybe 20-30 years from now. I know that's a very long ways away and I'm already freaking out but please answer my question below. I am 24 years old with 25k in savings and no debt. I am paying $250 a month for this life insurance policy for about 5 months now. I am apprehensive about how it will perform... however the surrender charge for policy year 1 is about $8,300. It is said this will be "subtracted from my policy account" if the policy is given up for its net cash surrender value (obviously $0 at this point). If my policy account is $1000, then will I owe $7,300 ??!? Or am I free to go? Please help me.... thank you...

• Answer:

  If you let the policy lapse you won't owe the insurance company anything. The surrender charge is there to encourage you to look at Life Insurance as a long term play. Life Insurance is NOT a crappy investment vehicle if it is designed correctly. What you should have at your age is a 30yr term policy to cover your immediate needs and in this case you have a VUL which should have been designed with a minimum non mec DB based on your $250/mth investment. From there you can do an Option 2 switch at optimal year so that you lower your cost of insurance in the early years stuffing more cash into the CV account. Also, most VUL's today you can deduct the policy expenses, mortality charges, fund expenses, etc from a specific account. With that in mind calculate what the expense to premium ratio is, usually 20-25%, pick the lowest charge account available, allocate 20-25% of your premium to that account and then deduct the expenses from that account. Your other 75-80% will then grow unencumbered by policy expenses. One last thought is if you are unsure of where to put your dollars, just opt for the fixed account, grows usually at 2-3% while you figure it out. I work for the largest general agent in the life insurance industry and have worked with planners on designing reasonable and customary insurance plans for individuals, estates, etc. If you need to look at illustrations or how to redesign the policy you can send me an in force illustration to review and I can discuss with some good contacts at AXA to ensure that your representative is handling the product and your needs accordingly. I won't charge you for anything just looking to help out. [email protected]