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What is Variable Universal Life Insurance?

Life insurance offers a way to give your family financial support after you pass, and policies that accrue cash value can grow your death benefit and allow you to access funds during your lifetime. A variable universal life insurance (VUL) policy invests cash value in mutual funds, making it riskier, but also offering greater growth potential than traditional policies. Aflac does not offer variable universal life insurance, but we do offer term life and whole life insurance policies to help meet your coverage goals.

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Key Takeaways

  • Variable universal life insurance is a permanent policy that allows the cash value to be invested in mutual funds.
  • Variable universal life insurance provides flexibility in premium payments and death benefits, but can come with risks and higher costs.
  • While Aflac doesn’t offer variable universal life insurance, our term and whole life insurance policies can provide the coverage you need.

What is variable universal life insurance?

Variable universal life insurance is a type of permanent life insurance that allows the cash value to be directly invested in subaccounts that operate like mutual funds, making it more susceptible to market behavior.1 While this kind of investment may help your policy's cash value grow much faster, you also risk losing value if the market dips.

If the company does allow the policyholder to borrow or withdraw funds from the cash value, the funds cannot fall below a certain level. Otherwise, you might need to pay higher premiums to keep the policy.1 As with most life insurance policies, the beneficiary of a variable universal life insurance plan gets the death benefit when the policyholder passes.2

Pros and cons of variable universal life insurance

Variable universal life insurance can be a valuable financial asset. However, it also comes with some drawbacks:

Pros: Variable universal life insurance

  • You can invest the cash value: Variable universal life insurance may be a good investment if these benefits appeal to your needs. First, the way you can invest the cash value in a variable universal life insurance plan may be useful if the investments you choose perform well.

  • Flexible premium payments: These plans usually have more flexibility around premium payments. You might be able to use the cash value to pay for premiums, but it depends on the company you are working with and their guidelines. Typically, the cash value can’t fall below a certain level, or the plan will lapse.1

  • Flexible death benefit: Lastly, there may be flexibility around the death benefit of a variable universal life insurance plan.3 This depends on the company you choose, but you may be able to change the plan's face value over time.

Cons: Variable universal life insurance

  • Level of risk: The level of risk in variable universal life insurance is much larger because the money in the cash value account is directly being invested into the market. This means the cash value is at greater risk and isn’t guaranteed year after year.1

  • Higher costs: There can be higher costs associated with variable universal life insurance. If you choose to borrow or withdraw funds, the premium payments can be more expensive than what they started at.1
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Should I get variable universal life insurance?

Variable universal life insurance may be a good investment if it's planned wisely. To decide if this plan is right for you, consider your:

  • Preferences
  • Coverage goals
  • Risk tolerance

If you want a policy with more flexibility that gives you control over your investments, this may be the right option for you. But if you want a less risky and complex policy, consider other options such as whole or term life insurance.

How variable universal life insurance compares to other life insurance policies

If you’re not comfortable with the amount of risk within a variable universal life insurance plan, there are more secure routes to consider. Here are two policies Aflac offers:

  • Term life insurance: Term life insurance may be a better choice than variable universal life insurance if you only need coverage for a specific period of time. It may be a good option for young families looking to save money upfront or seniors factoring in long-term plans.
  • Whole life insurance: On the other hand, whole life insurance lasts the entire life of the policyholder and still has a death benefit and cash value component. It may be a smart move if you are looking for more stability, while still providing ample security for loved ones later in life.

Get a life insurance quote today

Variable universal life insurance is a policy that comes with more flexibility and risk. While we do not offer variable universal life insurance at Aflac, we do offer term and whole life insurance policies for individuals and families. Our plans are portable and have reasonable premiums, and in some cases, you may be able to skip the medical questions. Start chatting with an agent today to learn more.

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