Due-diligence checklist before buying a VUL: 20 questions for families and their advisers

A due-diligence checklist for a variable universal life (VUL) policy is a list of questions that the insurer, the licensed representative, the custodian bank and the investment manager answer in writing, and that your own tax and legal advisers review, before you sign. The 20 questions below are grouped from A to E. Each one has a short note on what a good written answer looks like. The list does not recommend any product or insurer, and it cannot replace advice on your own facts.

How to use this checklist

Record each answer as answered in writing, answered verbally only, or unanswered, and sign only when all 20 are in writing, because a verbal comment that conflicts with the contract will not help later. Give the list to every professional involved (see for-advisers) so that one person owns each answer.

Collect the core documents first. MoneySense lists the Product Summary, the Product Highlights Sheet (for an investment-linked plan's sub-fund) and the policy illustration among the documents that accompany a life policy. For a high-net-worth VUL add the policy contract, the investment mandate, the custody agreement, the manager agreement and the fee schedules of the insurer, the custodian and the manager.

A. The counterparties (questions 1 to 4)

The MAS directories show whether a Singapore insurer, adviser or representative is regulated, and the Investor Alert List names unregulated persons who may be mistaken for licensed ones. MAS's first list of domestic systemically important insurers (21 September 2023) names four insurers and applies a 25% capital add-on from 1 January 2024; that status describes systemic importance, and neither it nor a rating is a guarantee of any policy. Question 3 matters because custodian and manager failure are third-party risks that product documents commonly leave with the policyholder.

B. The contract (questions 5 to 9)

MoneySense's guide to investment-linked policy charges lists the usual charge types and states that fees and charges may not be guaranteed and are subject to change; the Life Insurance Association (LIA) guide notes that significant charges usually fall in the early policy years and that ILPs typically do not provide guaranteed cash values. Both statements are about investment-linked policies in general; check each point against your own contract. See charges and guarantees-and-risks.

C. The illustration and the mandate (questions 10 to 14)

Ask for the projection to be rerun at a low or zero return with the actual charge schedule; if the policy lapses in that scenario, you have learned how much top-up capacity the structure needs. Read investment-options before settling questions 12 to 14.

D. Your side (questions 15 to 18)

Questions 15 to 18 are about you, not the product; a mismatch between what the bank, the insurer and the tax return say about your wealth and residence can slow underwriting or create reporting problems later.

E. Exit, succession and disputes (questions 19 to 20)

MoneySense states that life insurers grant a 14-day free-look period from receipt of the policy documents, with a refund of premiums less medical and other expenses; for an investment-linked policy confirm in the contract how market movements and costs are treated. FIDReC offers free complaint filing with an adjudication limit of S$150,000 per claim for claims filed on or after 1 July 2024; its Terms of Reference admit individuals, sole proprietors, small businesses, charities, trustees and insureds, but not larger companies, and exclude cases relating solely to investment performance. Succession outcomes depend on who owns the policy, the nomination type and applicable law, so obtain legal advice.

Red flags and next steps

Pause the application if any of the following appears:

• A person or firm that claims to be licensed but cannot be found in the MAS directories.
• Verbal statements that conflict with the contract, or any wording that suggests the account value is guaranteed.
• A projection with no 0% or low-return scenario, or with charges left out.
• Claims that a regulator has approved or endorsed the product, or that the structure is free of tax.
• Pressure to sign quickly, to move assets before the questions are answered, or to skip a professional's review.
• Reluctance to put an answer in writing.

A sensible next step is to send the 20 questions to the representative and to your tax and legal advisers at the same time, and to compare the written answers. If you want a second reading of those answers, register an enquiry through the contact details on this site.