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Do you have certain life insurance goals you hope to reach? Choosing the right type of plan can help make those goals a reality. At Aflac, we provide Aflac® Life Solutions—Term Life or Whole Life plans to keep your coverage straightforward. We do not offer variable universal life insurance, but it might be an option worth considering depending on your coverage goals. Read on to learn what variable universal life insurance is, its pros and cons, and how this life insurance plan compares to other policies.
Variable universal life insurance is a policy that works like indexed universal life insurance, but the cash value portion of the account is handled differently. This permanent type of life insurance allows the cash value’s growth to be determined by the investment performance in certain mutual funds.1
In contrast to traditional universal life insurance, the cash value in a variable universal life insurance plan can be directly invested into the market, making it more susceptible to market behavior.2 This type of risk can allow the cash value in your plan to grow at a fast pace, but it also makes it more vulnerable to market conditions. It is crucial to understand the cash value can undergo extreme losses.3 We recommend reflecting on this level of risk before making a decision.
With variable universal life insurance plans, the beneficiary gets the death benefit when the policyholder passes.4 To access the cash value, the plan may need to be forfeited. If the company does allow the policyholder to borrow or withdraw funds from the cash value, the cash value cannot fall below a certain level. If too much money is borrowed from the cash value, the policy might be terminated.5
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Variable universal life insurance and universal life insurance are very similar, but they do have some distinct differences. Read on to discover the pros and cons of variable universal life insurance.
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 mutual funds you choose perform well.
Additionally, 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.6
Lastly, there may be flexibility around the death benefit of a variable universal life insurance plan. This depends on the company you choose, but you may be able to change the plan's face value over time.
On the other hand, there are a few things to look out for in a variable universal life insurance plan. The level of risk in this type of plan 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.7
Also, 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.8
Variable universal life insurance may be a good investment if it is planned wisely. However, there is more risk associated with this type of plan compared to whole and term life insurance policies. The higher risk can create a higher reward, but it can also lead to higher premiums and a drop in the plan's cash value.9
At Aflac, we do not offer variable universal life insurance, but we strongly encourage you to take a detailed look at each plan and company before committing to a policy.
If you’re not comfortable with the amount of risk within a variable universal life insurance plan, there are more secure routes to consider.
Term life insurance may be a better choice 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.
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.
While we do not offer variable universal life insurance at Aflac, we can provide additional information around our whole and term life insurance plans. Our plans are portable and affordable, and in some cases, you may be able to skip the medical questions.
1-3, 5-9 Investopedia. Variable Universal Life (VUL) Insurance Definition. Updated July 10, 2020. https://www.investopedia.com/terms/v/variableuniversallife.asp. Accessed July 14, 2021.
4 Investopedia. Universal Life (UL) Insurance Definition. Updated June 26, 2020. https://www.investopedia.com/terms/u/universallife.asp. Accessed July 14, 2021.
In Arkansas, Idaho, Oklahoma, Oregon, Pennsylvania, Texas, and Virginia, Policies: ICC1368100, ICC1368200, ICC1368300, ICC1368400 and Riders: ICC1368050, ICC1368051, ICC1368052, ICC1368053, ICC1368054, ICC1368055. This is a brief product overview only. Coverage may not be available in all states, including New York. Benefits/premium rates may vary based on plan selected. Optional riders are available at an additional cost. The policy has limitations and exclusions that may affect benefits payable. Refer to the policy for complete details, limitations, and exclusions. For costs and complete details of the coverage, please contact your local Aflac agent.
Aflac does not offer universal life insurance, but we can point you toward our whole life insurance policy if you have different coverage goals in mind. Chatting with an agent about your options may make this decision easier.
Coverage is underwritten by American Family Life Assurance Company of Columbus.
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