Variable universal life (VUL) insurance may be a good idea if you are looking into purchasing life insurance. This insurance is a type of permanent life insurance coverage that offers whole life insurance coverage. It means that for as long as the policyholder lives and continuously pays premiums, this life insurance offers life insurance coverage. This life insurance has a cash value feature that permits policyholders to contribute to their chosen sub-accounts.
If their cash value is high enough, they can use it to pay premiums instead of out of pocket. Aside from that, they can also withdraw the cash or borrow it and pay it back later. VUL insurance also has a feature you can use to raise or lessen your policy’s death benefits. However, due to all of these and more, your premium cost may be increased or decreased. Since variable universal life (VUL) insurance is complex, it is important you understand it and how it works before you purchase it.
How Variable Universal Life (VUL) Works
As mentioned earlier, VUL is one of the types of permanent life insurance policies. It puts together some of its characteristics, which include death benefits and cash values. This life insurance allows you to decide how much you intend to pay for the policy yearly. Because this insurance is a whole life insurance policy, you must make enough payments yearly to cover your insurance policy cost. From the payments you make, your insurance company will subtract your premium cost and add the rest to your policy’s cash value.
Variable Universal Life (VUL) Insurance Benefits
Just as this insurance offers whole life insurance coverage, it also offers different benefits. These benefits include:
Whole life coverage
VUL policy offers coverage for policyholders for as long as they live. In any case, this only happens as long as you ceaselessly pay your premiums.
Flexibility
This coverage policy enables you to adjust your death benefit, but if you wish to enhance your death benefit, you would have to take an unused medical exam. However, if there is an increase in your income, you may also choose to resize your insurance premium payments. This life insurance allows you to resize your payments. Doing this can increase your cash value as well as your death benefits.
Tax advantages
Another benefit of VUL insurance is that your beneficiaries would not need to pay taxes on the death benefits. This coverage offers tax-deferred growth on your cash value.
Variable Universal Life (VUL) Insurance Disadvantages
Just like this insurance has benefits that make it a good option, there are also disadvantages. While considering its advantages, pay attention to the following disadvantages:
It is costly
Variable universal life insurance consists of different fees, which include administrative costs, insurance costs, and other fees. Also, if your insurance policy has high hidden fees, it would be removed from your cash value.
Other health insurance policies may be better
It may be a good idea to go for a different health insurance policy because of this insurance’s limitations on investment and growth options. If you intend to grow wealth, it is better to select another health insurance policy to be good enough for your goal.
Can I use Variable Universal Life Insurance for investments?
VUL investments will not reach the point investing companies would. This is so due to the fees involved with this insurance. Aside from this, it is also very risky to invest in this than other life insurance investments. This is because it can affect your death benefit and premiums negatively.
How to Get Variable Universal Life Insurance
To get VUL insurance, you need to follow the below steps.
Check the policy price
Before you buy a policy, confirm how much the VUL policy costs. Do not forget to check the monthly fees and the policy fees. If you purchase a high-free VUL, you will get little of your premium payments added to your cash value.
Evaluate the policy demonstration before purchase
Ensure you pay attention to the guaranteed parts of the VUL policy you intend to buy. Avoid purchasing life insurance without digging deep into its demonstrations.
Consider the insurance company’s financial strength
Check the insurance company’s ability to pay claims in years to come. Doing this can help you determine if the company can pay your claims when filed.
Work with a variable universal life insurance agent or professional
If you intend to purchase complex VUL insurance, it is advisable to work with an agent or professional to help you identify the best options.
