For those who haven't been initiated into the mysteries of life insurance policies, let me first briefly define a universal life policy. Essentially, universal life is a hybrid of insurance coverage and an investment. Part of your premium pays for the policy's death benefit -- the amount that's paid out when you die -- while another portion goes into an investment account. Depending on the type of universal policy you own, the investment portion of the policy may be invested in mutual fund, or it may simply earn a rate of interest based on the rate of return the insurers' assets earn.

Now, is a universal life policy a good investment? I need a whole lot of convincing. One problem is the cost. The agent's first-year commissions are usually so large that it takes a long time for the policy earnings to overcome that drag. What's more, virtually every presentation I've seen that touts life insurance as a terrific investment hinges on the policyholder borrowing money from the policy in later years. These borrowings are tax-free since they're loans rather than distributions. But there's a big potential hitch. If the policy lapses in the future -- which could occur if you can't meet the premium payments as you age -- those tax-free loans become taxable, and you could face a big tax bill.

Finally, I'm very -- no, extremely -- wary of the illustrations that agents use to sell these policies. The projections invariably make the policies look like you can't lose. Ask your planner to run the numbers assuming a very low rate of return, say, 6 percent; insurance costs at the maximum level the policy allows; and low returns and maximum costs. I think you'll find the scenarios aren't quite as rosy as they seemed. I know this won't make me popular with insurance sales people. But I believe most people are much better off keeping their insurance and their investment portfolios separate.