According to Hartford Life, such insurance is most appropriate for those investors with a higher risk tolerance, those who are comfortable investing in equities and in search of other tax-favored means of investing besides a 401(k) or IRA. It's suitable as well for investors who have a death benefit need for their beneficiaries, and also a good fit for more affluent investors with estate planning needs, who may wish to pass their wealth on to their beneficiaries.

One of the knocks against the earlier-generation VUL products is that they involve a combination of investments and insurance. "Combining investments and insurance is like combining oil and water," says Aaron Skloff, CEO of Skloff Financial Group, a wealth management firm in Berkeley Heights, N.J. "They generally result in a bad combination. Too often the investment choices are limited or, even worse, exclude key aspects of a properly diversified portfolio. Many times the investments are limited to the inferior proprietary subaccounts from the insurance company's lineup."
Skloff also criticizes the way such policies are sometimes sold. "Many insurance agents illustrate double-digit rates of return within the policies, an unreasonable expectation for most policyholders. It was these aggressive expectations in the mid-late 1990s that led many VUL policyholders to believe they could discontinue their payment premiums early. An unusually strong investment performance in the late 1990s reverted back to the mean, and in the following decade many VUL policies imploded."

Feldman says such criticism may be partly accurate but not totally so. Most companies, he says, may have proprietary products, but they usually include a mix of other subaccounts representing different types of families of funds.

John Resnick, an estate planner at Resnick & Associates in Harrisburg, Pa., and host of a syndicated radio show on business moguls called Legends of Success,  criticizes the cost of VUL policies. He feels mortality and expense (M & E) charges, which he says are often buried within the fine print, are too high.

"One thing that is certain," says Resnick, "is that mortality costs with the policy are guaranteed to increase as the insured gets older. One thing that is uncertain is the performance of the side investment funds. So if you combine increased mortality charges with a less-than-expected rate of return on the investment, the policy can implode and lapse without value."

Rybka disagrees with this assessment and counters: "None of the expenses are disclosed in a traditional product, whereas with a variable product, the SEC requires a prospectus and an accounting to the penny in a detailed confirmation state for each premium."

In Resnick's opinion, term life insurance is a better deal for investors under certain circumstances than VUL because it is less expensive. "The reason it is so inexpensive is not because Santa Claus is at the helm of the insurance company," he says," but if you hold onto the term policy for the long run, it will either cancel itself out or the premiums become unaffordable as the insured gets older. The only day you'll see the term insurance or the mortality charges of VUL not increase is the day that younger people start dying faster than older people."

Daniel B. Roe, chief investment officer of Budros Ruhlin Roe, a wealth management firm in Columbus, Ohio, also feels term insurance is "the most appropriate solution for assuring liquidity upon one's death. Only those that sell life insurance try to make it more complex to fabricate the 'need' for VUL. Any other use simply allocates capital to a less optimal environment due to the greater expenses of investments within a VUL policy, as well as the conversion of potential capital gains to ordinary income."

   Feldman says, "It all boils down to the needs of the client and determining the best solution given the client's problems to be solved."
Guy Cumbie, a planner in Fort Worth, Texas, and a past president of the Financial Planning Association, does not object to VUL insurance as a product nor does he object to its higher expenses, but he says investors have to exercise caution because of its complexity.

"The no-load, low-load guys that are supposed to wear the white hats in the insurance world, at least in the eyes of the planning community, have a product," Cumbie says. "It's not necessarily a disastrously expensive product, it's just complex and therefore subject to abuse, but there's nothing inherently bad about it.