While searching for the type of permanent life insurance to buy, broaden your search to include the variable universal life insurance.
We must say there is no better life insurance policy in general because we are beings with unique needs. So, it is right to let everyone choose a policy that best works for them.
Insurance companies that offer life insurance coverage have different policies to provide, depending on the policyholder’s needs and pocket size.
So, understand different policies, like the difference between permanent and term life insurance and all their types.
For the benefit of anyone looking into buying coverage, here’s what you must know about variable universal life insurance.
What is variable universal life insurance?
Variable universal life insurance is still a branch of permanent life insurance with many exciting features. First, it is a permanent policy which means that it covers the policyholder for the rest of their lives.
It also has a savings feature that permits policyholders to invest their savings in preferred investment vehicles. It is where the coverage got its name from; the ability to invest in various schemes.
So, policyholders not only build up cash value, they send the cash to an investment for more income. The savings scheme takes the form of a mutual fund and obeys the rules of the market. When the market does better, the savings make more gains; if there’s a bad market, the savings experience loss.
Furthermore, the policy is more flexible and offers beneficiary benefits; the flexibility comes in when making premium payments. The premiums for this coverage are not as rigid as those in whole life insurance. Variable universal life insurance premiums become more expensive as the policyholder advances in age.
How variable universal life insurance works
The coverage operates two different components; the cash build-up account stays separate from the beneficiary benefit account. Yearly, the insurer removes from the savings what should be in the beneficiary benefits and puts the rest into an investment account.
The savings account may be more than one, according to the preference of a policyholder. The cash value build-up can be invested in stocks, bonds, ETFs, mutual funds, or other investment vehicles.
The policy usually does not have an endowment age, so the cash value tends to build up more than the whole life insurance policy. With all the cash value build-up, the returns on the investment remain tax-free.
Moreover, the premium a policyholder pays is controlled by the Internal Revenue Code, limiting the maximum cash value allowed in the policy they deliver.
In essence, with enough money in the cash savings, the policyholder can pay any premium they want, or the cash value can take care of the monthly premium deduction for some time if it is enough.
How to know if your policy is active
Some factors may affect the activeness of this policy, but majorly, having enough cash surrender value keeps this policy in force. The cash surrender value must cover the cost of the insurance policy and associated benefits.
Who needs variable universal life insurance?
This policy benefits those who need to save. Anyone who can afford high premiums can keep the policy. It will also allow you to pay any amount in the future so long there are enough savings in the account already.
More so, people who do not mind taking investment risks can go for this policy because the savings are dependent on the market value at a time.
Additionally, policyholders of this policy have their loved ones in mind while purchasing it. The beneficiary payout included in the policy helps to keep your loved ones financially okay in the event of your passing if the policy is still in force when you pass.
Therefore, it is not enough to want this life insurance policy; you must look at your needs, pockets, and aim of wanting the policy.
How good is variable universal life insurance?
Variable universal life insurance is generally great if the market remains favorable, and the investments bring in high returns and maybe cover more premiums.
Advantages of universal life insurance
The policy permits you to add riders to it. If the coverage is not enough for you as a policyholder, you have the right to add more riders to your policy with the help of your insurance provider.
For example, policyholders can add a care rider if they have a diagnosis or a waiver if they need to stop paying premiums due to illness.
Furthermore, you can take out your beneficiary benefits from this policy. Insurance companies make this feature available when it is necessary.
Disadvantages of VUL
The policy will not be favorable to everyone, and it has disadvantages.
The premiums become expensive as the policyholder gets older. It may concern most people who do not wish to spend more money in their old age.
The sub-accounts depend on market moves, and the policy may lose all if the market takes an adverse turn and wipes the savings.
The risks involved may not be a good action for non-risk takers. So, if you do not have the heart for risks, you must avoid buying the variable universal life insurance policy.
Other types of permanent life insurance
It is understandable if this policy does not speak to you and your needs, but you still need to buy permanent life insurance coverage; then the whole life insurance may be the one for you. Though it may be expensive and comes with a fixed premium amount, you may love the features and enjoy the policy.
Peradventure you do not want something permanent, the term life insurance will serve the purpose. The policy runs between 10 – 30 years and expires. All you need is to speak with a good insurance provider to know how to arrange your policy.
The VUL may require a policyholder to go for a medical examination which most people do not like. It is wise to understand a policy thoroughly before you commit to it.