What Is Variable Universal Life Insurance- Some Basic Facts

VUL (Variable Universal Life) insurance policies take the traditional whole life policy one step further. Instead of just putting money into an account and letting it sit there, a VUL policy allows the cash portion of the policy to be put to good use. Even though this sounds like a great idea, there is a downside that can have disastrous results if you aren’t fully aware of how the policies work.

Better Than a Whole Life Policy

A whole life insurance policy is considered to be a permanent policy. This means that once the policy is purchased, it will be in place until the client passes away. VUL policy adds an extra benefit to the mix by creating both a death benefit account and a savings account. By investing in the cash portion of the savings account, the overall payout of the policy may be increased. This ultimately means that you can increase the total value of your policy if good investments are made.

Improved Flexibility

With a VUL insurance policy, you have both a death benefit portion that is set at a guaranteed amount and a savings benefit that is used to potentially increase the amount of your policy over time. This improved flexibility allows you to make the most out of every dollar you put into your policy. While building the death benefit portion of the policy, you will also be adding money to the savings portion that can be used to invest in the stock market. Not only are you securing your benefits, but you are also building equity that can be used in other ways.

Increased Potential for Growth

Variable life insurance policies allow the bulk of the premium to be invested in one or more separate investment accounts. You can select from multiple investment options like fixed-income, stocks, mutual funds, bonds, etc. While there is a substantial risk any time you invest in the stock market, you can also reap financial rewards if the market works in your favor. The savings portion of the policy can dramatically increase over time if the right stock choices are made. In most cases, there is no “cap” in place to restrict how much money is earned through the stock market so your growth potential can increase year after year.

Know the Risks

Unlike a traditional policy, a Variable Universal Life policy allows the cash portion of the policy to be put in a separate account and used to purchase stocks through the stock market. When the market is booming, the dividends will increase the value of the Universal Variable Life Insurance policy. If the bottom drops out of the market, it can take the cash value of the policy with it. Just as there are no “caps” in terms of growth, there are also no “caps” when it comes to the amount you can lose. Understanding these risks will help you make an informed decision when it comes to investing some or all of your money.

The agents of ISU-Wissink Agency are always looking for new and creative ways to help their clients invest in their future. With a VUL insurance policy, agents can assist their clients in preparing for their future. Both parts of the policy are designed to provide benefits on a long-term basis. While the savings portion can be utilized before cashing in the policy, the death benefit portion will stay intact to be used for its intended purpose.