Protect What Matters
Variable Universal Life
Variable Universal Life (VUL) was created to combat the low returns of its cousin, the Universal Life. Some will say that the VUL is made up of permanent life insurance and an investment portfolio. The investment portfolio part is correct; the permanent life insurance is not. The VUL, just like its cousin (the UL), is composed of annual renewable term insurance and a cash value component (the investment portfolio). Investment portfolio has a rather attractive ring to it; it sounds good, catchy, Wall Street like. All it really means is that you can choose where to invest your money. You can select stocks, mutual funds, bonds, etc… You can also control how much goes towards the purchase of life insurance and how much is allocated towards your investment portfolio.
Just like any other investment, your portfolio is at risk; you can make money when the market goes up, and you can lose money when the market goes down. The risk of gains and losses is all on you. Neither the insurance company nor the funds’ managers take any responsibilities for losses incurred.
People that buy this type of policies do so with the goal of obtaining a return that is above average.
Just like the UL, the VUL’s cost of insurance goes up every year and it can skyrocket in the later years to the tune of several thousand dollars every month.