A Gamble On Life

But the ""variable'' is what really rings the buyers' bells. With other types of insurance, your cash goes primarily into bonds. With VUL, you can choose among mutual funds, including funds invested in stock. This could give you higher returns if you hold the policy into your retirement years.

You can also play tax tricks that other deferred-savings products don't allow. Like taking money out of the policy and paying no tax until you've withdrawn all the cash you put in. And borrowing against your cash value, often at a low interest rate. Structured loans and withdrawals can yield a regular tax-free income. When you die, the remains of your policy (minus the sums you've used up) can pass to your beneficiary tax free.

So what's not to like? On paper, nothing. But I'm always mindful of Murphy's Law (if anything can go wrong it will) and of Quinn's Corollary (Murphy was an optimist). Some caveats:

Most VULs carry higher expenses than other types of policies. You pay more for the VUL itself and more for investment management. On one typical contract, a 9 percent return netted down to 2.5 percent after 10 years (due largely to sales charges) and 6 percent after 20 years, including the value of the insurance. Buyers should plan to put all their money into the policy's stock-owning funds, says life-insurance consultant Peter Katt of West Bloomfield, Mich. Stocks have a better chance than bonds of yielding a decent return after costs.