This page outlines the issues you'll face if you purchase a Variable Universal Life (VUL) Insurance policy from Ameriprise.
The main issue you have with a VUL is the fees asscoiated with owning a VUL. These fees take a big bite out of your returns.
Premium Expense Charge
The premium expense charge is a 5% fee that Ameriprise takes right off the top of any payments you give Ameriprise. The 5% fee applies to the life insurance payment and the over funding portion of the payment. For example, if you pay $1000 dollars each month, Ameriprise takes $50 dollars right off the top. Source - page 18 of the Riversource VUL IV prospectus
If the value of the policy is below $250,000, you'll pay a fee of $7.50 per month to own the policy. If the value of the policy is above $250,000, you won't pay the $7.50 per month. Source - page 19 of the Riversource VUL IV prospectus
Mortality & Expense (M&E) Charge
The M&E charge is yet another expense you have to pay. The cost of this expense to you is .9% per year for the first 10 years of the policy. Source - page 20 of the Riversource VUL IV prospectus
Sub-account fees and expenses
When you overfund the VUL, the remaining payments will go into what they call sub-accounts. Basically, a sub-account mimics a mutual fund and you'll have fees associated with owning the sub-accounts funds. The cost on the sub-account range from 0.51% to 1.86%. Source - page 8 of the Riversource VUL IV prospectus
The sub-account fees can increase over time since Ameriprise waives some of the fees associated with the sub-account expenses and Ameriprise can chose not to waive the fees at anytime. Source - page 10 of the Riversource VUL IV prospectus
In order to keep you in the VUL to collect fees, Ameriprise charges a surrender charge if you cancel the policy within the first 10 years. If you cancel the policy within years 1-6 the maximum you'll pay to surrender is $2,703 for a $300,000 face value life insurance policy. After the 6th year, the surrender charge gradually decreases. If the face value of the life insurance policy is greater than 300K, the surrender charge schedule increases. For example, on a 2 Million dollar face value life insurance policy, the surrender charge is $20,840 for years 1-6. Source - page 19 of the Riversource VUL IV prospectus
Cost of life insurance increases as you get older
The cost of insurance isn't fixed and could increase as you get older thus making the policy very expensive. Source - page 18 of the Riversource VUL IV prospectus
Cost of insurance is generally more expensive than term
Generally the cost of insurance for a VUL is more expensive than a term life insurance policy.
Additional Riders will cost more
If you look in the Riversource prospectus, you'll see many additional riders. If you chose a rider, this will cost you extra money per year. For example, the Accidental Death Benefit Rider cost approximately $0.08 per 1,000 dollars. Source - page 5 of the Riversource VUL IV prospectus