Variable Universal Life

Example

“Mark's variable universal life policy allowed him to reduce his premium payments during a difficult financial year while maintaining his $300,000 death benefit through accumulated cash value.”

Memory Tip

VUL = Variable (you choose investments) + Universal (you choose premium amounts) + Life insurance - maximum flexibility with maximum responsibility.

Why It Matters

VUL policies offer the ultimate flexibility in permanent life insurance, allowing you to adapt both investment strategy and premium payments to changing financial circumstances. However, this flexibility requires active management and understanding, as poor decisions can result in policy lapse or inadequate death benefits.

Common Misconception

People often think VUL policies are 'set it and forget it' products or that flexibility means no risk. In reality, VUL policies require ongoing attention and decision-making, and the combination of market risk and flexible premiums can lead to policy failure if not properly managed or if investments underperform.

In Practice

Susan starts a VUL policy at age 35 with a $400,000 death benefit, paying $4,000 annually into aggressive growth subaccounts. At age 45, she increases premiums to $6,000 during high-earning years. At 55, market downturns reduce her cash value from $95,000 to $70,000, but she maintains the policy by temporarily increasing premiums to $7,500. By age 65, despite market volatility, her cash value has grown to $180,000, providing flexibility for retirement planning.

Etymology

Variable Universal Life (VUL) was developed in the 1980s, combining the variable life concept from the 1970s with universal life's flexibility introduced in 1979.

Common Misspellings

Related Terms

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