Variable Universal Life Insurance

Variable universal life insurance is an option for those who want to be more in control of their investments into life insurance. (That can sometimes be a good thing or a bad thing, depending on your investment expertise!)

This particular type of insurance product gives you more ability to make decisions about your insurance over the long term.

The key aspect of this form of life insurance is that the death benefit will adjust over time, based on how well the underlying investments perform.

The Bucket

The easiest way to describe a variable universal policy is to liken it to a bucket.

You pay premiums into the insurance policy - the bucket.

Part of your money is invested to grow over time. Each year, a portion comes out of the bucket to pay the insurance component. The rest stays in the bucket to grow -tax free.

Prior to investing in variable universal life insurance, you should consider both the positive and negative aspects of it.

It allows you:

  • to make decisions about the underlying investment accounts for your policy.
  • In addition, this policy offers flexible premiums to accommodate your ever-changing needs.
  • The death benefit is also adjustable. The death benefit is the payment received when you - the insured - dies. This benefit will rise and fall dependent on how the underlying investments perform.

The investment account can be invested in stocks, bonds and guaranteed investment certificates.

Since the stock market is an ideal investment market over the long term, and is likely to perform well over the long term, this allows the death benefit to increase over time, in most situations.

Significant cash value builds up over this time. It is important to note that if you die when the stock market is not performing well, the death benefit may be markedly smaller. Most policies do guarantee that a death benefit will be paid to the listed beneficiaries.

Because this type of life insurance gives you more ability to manage the underlying securities of the policy, you are assuming risk. Rather then the insurance company.

All federal securities laws and the Securities Exchange Commission does monitor the purchase and use of these types of insurance policies, similar to how they manage other investments.

The Good And The Bad About Variable Universal Life Insurance

This particular type of insurance product does offer several benefits;

  • Since the premium and death benefits are flexible, there is the potential for the cash value of the policy to increase significantly, depending on how well the underlying funds perform.
  • It is also possible to withdraw funds from these accounts or to borrow them.
  • The insurance proceeds are paid out completely tax free to your heirs.

It is important to have the skill necessary to manage these types of investments - or to work with a good insurance agent and company.

Variable universal life insurance can be an outstanding investment opportunity for the right person. Consider the good and bad prior to investing.

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