One of the investments a person can do is to secure his or her future through life insurance. And if you are someone who is planning to have a condo living in a city, perfect life insurance is suited for you. For the last decade, Variable Universal Life Insurance (VUL) has been the top-picked insurance plan of many. Since it offers a great potential for cash value growth through investment funds, it has also become the most popular insurance plan in the Philippines.
In this article, you will know everything you need about Variable Universal Life Insurance (VUL). You can now understand how VUL works, what are its key features, and who can avail of it.
Basics of Variable Universal Life Insurance (VUL)
Variable Universal Life Insurance (VUL) is a universal and permanent life insurance plan or policy. Just like any other life insurance plan, this also offers life-long protection. As long as you are alive and sufficient premiums are being paid, you can maximize all of its flexible features.
This life insurance plan is a financial product that gives insurance benefits, flexible premiums, the potential for higher returns, and most importantly is the fund accumulation. While it gives you increased flexibility and high growth potentials, a policy-holder or an investor like you should not forget to assess the risks before buying it.
How VUL works
As mentioned, Variable Universal Life Insurance (VUL) is always a permanent life insurance policy. To explain it better, this means that this life insurance plan has the characteristic to earn cash value over time. Given that you will have a specific crediting rate on the cash-value component, VUL will allow you to bring some or even all of the cash value you may have in your policy, into a “variable account” consisting of investment funds.
Read: Variable universal life insurance pros and cons
This dual nature or characteristics of Variable Universal Life Insurance (VUL) plan assures you with valuable life insurance coverage, along with a cash-value component. This means that you have a power or a degree of control over where you want to put the cash-value portion of your policy for greater earning possibilities. And of course, there is a market risk that comes along with it.
Who can have VUL Insurance?
In every life insurance plan policy, it is important to check first if you are a prepared candidate for these investments. Variable Universal Life Insurance (VUL) is perfect for those people who want to make sure that you can monitor the performance of your investment over time and you like to make decisions on allocating funds. These people are said to be the most proactive in managing their investments. Moreover, just like with any other investment, you can only be a candidate for this insurance plan if you want to take a risk. This risk involves the potential of the cash value to be reduced.
Thus, it is vital to assess if VUL is the best type of life insurance for you. You can seek help through a life insurance agent in instances like this. You have to review first your situation and current goals.
Key Features of Variable Universal Life (VUL) Insurance
Flexible and Adjustable Premiums
If you are looking for an investment option for your bonuses, being a policyholder for a Variable Universal Life Insurance (VUL) plan is a good and wise choice for you. With this life insurance plan, you have the choice of putting in more than the regular premium. The excess can become an additional investment. Thus, as a policyholder, you can have more accumulation of the fund value. On the other side, if there is an unforeseen financial debt or crisis, the policyholder will be saved by the Variable Universal Life Insurance (VUL) plan. The plan will take effect and it will pay or cover the charges of the policyholder. And the good thing here, as long as the current plan has enough fund value, it will not lapse
later on. It could also help in terms of payment; you have the power to skip or stop paying. Your cash value can cover the costs.
Potential Higher Returns
For Potential High Returns, every policyholder of a Variable Universal Life Insurance (VUL) plan can surely have higher returns. This is because the VUL plan, in comparison to other insurance policies, is connected to bonds and stocks. According to research, since the beginning of getting the insurance plan, a policyholder can get an average of 16.6% equity and 7.8% bond fund. This is high in terms of accumulation rate.
Variable Universal Life Insurance (VUL) plans can have higher returns but it also projects higher risks. With this, if you become a policyholder of this plan, you will realize your goals faster and you will get bigger fun as you expected.
Liquidity
If you get into a financial crisis or need, you being a Variable Universal Life Insurance (VUL) holder can access the fund value. This process in comparison to other or traditional plans is considered to be a withdrawal and not a loan. This only means that if you withdraw an amount of money, you will not have any interest. However, it is best to return or reinvest the same or higher amount of money to make sure that your goal or objective is still on track.
The Variable Universal Life Insurance (VUL) plan has helped Filipinos become successful with their savings and investments. This serves as a way to assist the families left by a loved one. Because of its cash value, this also serves as a retirement plan for OFWs and elderlies.
Now, if you are a young professional who is looking for an investment such as having a condo living for investment or putting up a business for your family’s future, it is time to also consider taking life insurance plans. But before taking one, you have to think of everything. This includes your goals and if a Variable Universal Life Insurance (VUL) plan is suitable for you.
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