What Is Variable Universal Life Insurance?

Variable universal life is a form of permanent life insurance. It has become a popular way to invest money, mainly because its cash value has special “tax-advantaged” status from the Federal government.

Even though it’s popular, a variable universal life policy isn’t for everyone. There are serious investment risks that go with a variable universal policy. People who aren’t experienced investors, don’t have extra cash to risk, or are more concerned about protection than return on investment may want to consider one of the other kinds of life insurance.

How Variable Universal Life Works

Like other permanent life insurance policies, a variable universal life policy has two parts:

• a benefit value that pays out when the policyholder dies.
• a cash value that can provide financial returns while the policyholder is still living.

These policies are called “variable” because the cash value can be invested in a number of different accounts that work like mutual funds. And a standard universal life policy, the monthly premium payment is flexible.

Advantages Of Variable Universal Life

A variable universal life policy can make good sense for many people. Here are some of the advantages:

• The premiums are flexible.
• The investment earnings are tax-free as long as the policy is in effect.
• Some life insurance companies offer as many as 50 different accounts to invest the cash value in. These range from safe accounts with low returns to risky accounts with high returns.

Disadvantages Of Variable Universal Life

Variable universal life policies aren’t for everyone, though. Here are some disadvantages to consider:

• They tend to cost more than other kinds of life insurance.
• They require a good understanding of the risks involved in investing money.
• For experienced investors, the account options offered by the insurance company may be too limited.

Not sure what your best option is? Talk with a professional life insurance agent. To get matched with agents in your area, use our free online quote service.