5 Reasons to Review Your Variable Universal Life Policy Every Year

A VUL is life insurance combined with an investment account. Part of the money you pay (your premium) goes into the investment account. You control the investments, but that also means more risk. If the policy isn’t managed well, it can lose value, cancel itself, and leave your family with no death benefit—and possibly an unexpected tax bill.

If you have one of these policies, the good news is that there are steps you can take to help prevent this from happening. Here are five reasons to review your VUL policy every year:

Your VUL Policy’s Projected Return Is Just That—A Projection

Many VUL contracts are sold using illustrations based on fixed annual return assumptions—often 8% or more. But the markets don’t move in straight lines, and neither does your policy performance. If the actual returns fall short of those initial projections, it can have major consequences: diminished cash value, reduced death benefit, and jeopardized borrowing potential. The only way to know if you’re still on track is to review how your policy is performing against actual returns, not a dated illustration. To track your policy’s performance, consider working with your financial advisor for an updated in-force illustration each year to compare with the original.

Life Insurance Agents May Be Paid Up Front and Disappear

The traditional life insurance sales model often leaves clients unsupported after their purchase. Typically, agents earn a one-time upfront commission and are rarely incentivized to manage the contract over the long term. While the agents help you choose the investments inside your VUL policy at the outset, once the policy is in place, you must manually change them yourself over time. If you’re not sure what changes would be beneficial, your financial advisor can help manage the investments in your existing VUL policies. Working with an experienced advisor can help improve your chances of long-term success.

Tax-Free Distributions Sound Great—Unless They Fail

One of the main appeals of a VUL policy is the potential to take tax-free distributions from its cash value. The idea of the money going toward your policy’s cash value growing through investments and later accessing it tax-free is attractive, but it only works if the policy performs well. That’s why it's crucial to request an annual in-force illustration from the insurance company. This shows how the policy is performing based on actual returns, current cash value, and its ability to support future tax-free withdrawals.

Without regular reviews, what seems like a tax-efficient strategy could turn into a costly surprise. When requesting an illustration, be specific. Ask for different versions showing various return rates, distribution amounts, or changes in premiums or death benefits. Work with your advisor to choose the right scenarios designed to keep your policy on track.

The Hidden Cost Drivers: Cash Value vs. Death Benefit vs. Age

Three main factors affect the internal cost of your policy: your age, the cash value, and the death benefit amount. The bigger the gap between your policy’s cash value and its death benefit, the more expensive it is to maintain. As you get older, those costs go up. If you’re not carefully managing your investments and monitoring performance, the rising costs can hurt your policy. Staying on top of the cash-to-benefit ratio is essential to keeping your policy viable.

Internal Costs Rise Exponentially with Age

It’s important to know that the insurance fees that come out of your contract’s cash value each year increase as you age. That’s why annual reviews aren’t just a good idea; they’re a necessity. Every year, you typically review the cash value, prior withdrawals (if any), current investment allocations, and future assumptions. What worked in your 40s might not work in your 60s. The sooner you detect issues, the more options you’ll have to fix them.

The Bottom Line: You Can’t Set It and Forget It

Too many policyholders treat VUL contracts like “set-it-and-forget-it” plans. This can become a costly mistake. When a VUL policy fails, three things could result:

• All the premiums you’ve paid disappear.
• The death benefit your family was counting on could vanish if the policy fails to perform as designed.
• Any past distributions may become taxable as ordinary income if your policy fails.

These are catastrophic outcomes—but they are avoidable. Annual policy reviews, guided by experienced financial professionals, are your defense against policy failure. At Focus Partners, we’ve built our experiences on helping clients protect and grow their wealth. If you own a VUL policy—or are considering one—we can help your policy serve you, not surprise you.

If you’re not working with an advisor, we would be happy to help. Schedule a phone call or a virtual meeting with our Client Development team.

©2025 Focus Partners Wealth, LLC and Focus Partners Advisor Solutions, LLC. All rights reserved. Services are offered through Focus Partners Advisor Solutions, LLC (“Advisor Solutions”) and Focus Partners Wealth, LLC (collectively referred to in this document as “Focus Partners”), SEC registered investment advisers. Registration with the SEC does not imply a certain level of skill or training and does not imply that the SEC has endorsed or approved the qualifications of the RIAs or their representatives. Prior to January 2025, Advisor Solutions was named Buckingham Strategic Partners, LLC, and Focus Partners Wealth was named The Colony Group, LLC. RO-25-4527342

This article is for informational purposes only. The information provided does not purport to present a complete picture, but Focus Partners believes the information is representative of issues and needs facing some clients and why they may seek this service. This should not it be construed as, specific investment, tax, or legal advice. Individuals should seek advice from their wealth advisor or other advisors before undertaking actions in response to the matters discussed. No client or prospective should assume the above information serves as the receipt of, or substitute for, personalized individual advice.