Policy Types

Understanding Variable Universal Life Insurance

Universal Life Insurance, a type of permanent life insurance, comes in many different varieties. Variable Universal Life traditionally offers the potential for cash value through investment funds.

What Is Universal Variable Life Insurance?

Not all life insurance policies are alike. This rule holds especially true when you’re looking at life insurance that goes beyond a basic term life policy. Here, we’re looking at the basics of a variable universal life (VUL) insurance policy that includes what it is, how it works, and a few of the pros and cons.

How variable universal life insurance works

Like whole life and universal life (UL) insurance, VUL is a permanent life insurance policy with the potential to earn cash-value over time. It’s similar to UL insurance, but instead of earning a specific crediting rate on the cash-value component, VUL allows you to put some or even all of the cash-value you may have in your policy, into a variety of investment funds. The dual nature of VUL provides you with valuable life insurance coverage, along with a cash-value component that permits you a certain degree of control over where you want to allocate the cash-value portion of your policy for greater earning potential.

Advantages of variable universal life insurance

  • A minimum guaranteed death benefit that won’t decrease as long as you continue to make your minimum premium payments
  • Flexible minimum and maximum premium payment options
  • The potential to earn higher than average returns compared to other types of permanent life insurance
  • Permits you to maintain a certain level of self-directed control over where you want your earnings to be allocated
  • Allows you to better control your individual risk tolerance
  • Any growth on returns are tax-deferred until they are withdrawn

Disadvantages of variable universal life insurance

  • While you may experience better than average cash-value growth with a VUL, you can also experience a loss in your cash-value earnings due to changes in the stock market
  • Fees that are associated with a VUL may be higher than with a universal life insurance policy
  • VUL is more complex than most other forms of life insurance and should be monitored closely throughout the life of the policy.
  • VUL is typically subject to surrender charges for a period of up to 15 years (more or less depending on the carrier) which can be very high in the early years of the policy.

Because of its earning potential, a VUL can be a way for you to build your nest egg for retirement, while at the same time, have the life insurance coverage you need. For more information on other types of life insurance including universal life and indexed universal life, visit the Protective Learning Center.


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All Learning Center articles are general summaries that can be used when considering your financial future at various life stages. The information presented is for educational purposes and meant to supplement other information specific to your situation. It is not intended as investment advice and does not necessarily represent the opinion of Protective Life or its subsidiaries.

Neither Protective Life nor its representatives offer legal or tax advice. We encourage you to consult with your financial adviser and legal or tax adviser regarding your individual situations before making investment, social security, retirement planning, and tax‐related decisions. For information about Protective Life and its products and services, visit www.protective.com.

Variable Universal Life Insurance

As a type of dual life insurance policy, variable universal life insurance can offer you life insurance coverage along with the potential to earn cash-value over time. This article looks at the basic definition of a variable universal life insurance policy, as well as some of the pros and cons. For more information, visit our learning center.

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