Variable Universal Life


A form of cash-value life insurance that offers both a death benefit and an investment feature. The premium amount for variable universal life insurance (VUL) is flexible and may be changed by the policy owner as needed, though these changes can result in a change in the coverage amount. The investment feature usually includes "sub-accounts," which function very similar to mutual funds and  provide exposure to stocks and bonds. This exposure offers the potential of an increased rate of return over a normal universal life or whole life policy.  At the same time this exposure includes risk of cash value decline or loss, as with most equity and bond based investments.


In addition to potential equity based cash value growth provided by VUL policies, the level of premium funding is very important.  If the premium being funded per year is not sufficient to cover the internal product costs and an excess to allow for cash values to grow sufficiently, the policy could produce less than anticipated results, or even worse, the risk of lapsing. 


Variable Universal Life Insurance works best when the policy is max funded for a given amount of death benefit.  Periodic reviews and monitoring of VUL policies are very important in case allocation changes or funding adjustments need to be made.  The same tax benefits exist with Variable Universal Life policies as with other permanent life insurance policies.