What is Variable Universal Life Insurance?

Variable Universal Life Insurance or VUL is a type of insurance that branched out of Universal Life Insurance. The keyword in this type of insurance is “variable” which connotes the ability of the policy holder to invest part of the premium to different investment opportunities. The insurance company will provide different opportunities for investment and the earnings from investments will be given to the policy holder.

There is also a cash value in the accumulated premium payments which could be given to the beneficiaries when the policy holder dies or reaches the age of maturity. Insurance companies usually set the age of maturity at 95 while a small group of companies set maturity at 100.

This is also a little bit different with Universal Life Insurance in terms of payment. Universal Life has a fixed amount of premium payments every month while VUL offers flexible payments for their policy holders.

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Benefits of VUL

Tax Benefits – VUL is a type of insurance that enjoys considerable tax advantages. Among them are the tax free earnings from the investment in VUL. No matter how much percentage of your premium you place in the investment, your earnings from this investment are tax free. VUL also offers loans for policy holders.

Aside from the obvious advantage of offering easy payment schemes, the loan obtained by the debtor is tax free. The beneficiaries of VUL will also enjoy tax exemption as they receive a lump sum amount.

Flexible Premium – Policy holders could adjust their premiums based on the cash value of their present VUL. They could also base their monthly payment on the earnings they have on their investments. The IRS also sets some rules and restrictions on how much premium should be paid.

Choice of Investments – Insurance companies offers a good number of investment opportunities. Policy holders could choose from the safest type of investment to the most complicated and risky type of investment but with the highest possible yield.

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Caution on VUL

Expensive – VUL is a type of insurance that are usually preferred by upper-middle class families. The premiums in VUL are based on the term rates and it could get higher every year. Since some cash incentives and investment opportunities could be obtained by the policy holder, there are a lot of paper works to move and a lot of people to involve.

Risk in Investment – Although there are investment opportunities that offers the least danger in investment, the policy holder is still at risk of losing money. The company does not guarantee any earnings and the losses will usually be shouldered by the policy holder instead of being shared with the company.

Highly Complex – This type of insurance requires assistance from insurance experts. There are a lot of terms and conditions that should be understood and the policy holder could end up with a VUL insurance that will not work to their advantage. Contact an insurance expert or broker first to completely understand the terms and conditions of the VUL insurance.