Variable Universal Life Insurance

Variable Universal Life Insurance: What You Did Not Know

What is it and Why Should I Care?

Variable Universal life insurance, (often referred to as VUL), describes a type of life insurance. This type of life insurance is also considered a cash value insurance policy. This cash value can be invested in a various accounts and fashions. Compared to whole life insurance, variable universal life insurance offers a much more diverse option and opportunity for higher returns. Similar to an life insurance policy, variable universal life insurance offers a pay-out in case of death.

The Elements of Variable Universal Life Insurance

The 'variable" part of variable universal life insurance refers to the idea that it can be invested in a variety of means, similar to mutual fund investments. The "universal" part of variable universal life insurance means that there is flexibility with how the owner can make payments on the policy. The premium for a variable universal life insurance policy is not a fixed amount. Premiums can vary from month to month and are set according to IRS limitations. This is in contrast to whole life insurance in which the premium is usually a fixed amount that is largely unchanged over time.

Is Variable Universal Life Insurance Right For Me?

Before deciding to invest in variable universal life insurance it is crucial to asses whether it is right for you and your situation. Having variable universal life insurance is most appropriate when the owner has the ability to heavily fund the policy and is looking to have it for an extended period of time. Before making the decision to commit to a variable universal life plan you'll want to take a hard looks at your long-term financial goals. These include questions like: Do I want to provide a pool of money, made available to my spouse at death? Do I also want this pool to be available to pay for estate taxes? Do I want the ability to borrow money from the fund in my retirement if need be?

Tax Free Borrowing Against Your Policy

One of the distinct benefits of owning variable universal life insurance is the idea of borrowing against the cash that has built up in your policy. Using this method, you can avoid paying taxes on money borrowed against your policy. This is extremely useful when you have expenses during your retirement. With variable universal life insurance you can borrow money against the cash value in your policy without paying taxes on the money.