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  • How Does VUL Insurance Work

    17 March 2021


    How Does VUL Insurance Work?

    If you have a financial advisor in your group of friends or relatives, chances are, one of your conversations has led them to ask you, “Are you willing to grow your money through investment?”

    If you answer yes, then you’re probably aware that you can make money and have insurance coverage, too. This type of insurance is known as variable universal life (VUL).

    Still, you may need to familiarize yourself with the way VUL insurance works. This sheds light on what makes insurance with investment a sound financial strategy.

    Why Does VUL Insurance Matter?

    In the graph below, you’ll find a quick answer to the question at hand. 

    How Does VUL Insurance Work graph

    Source: Insurance Commission Annual Reports

    Based on the figures from the graph, one can only surmise that VUL insurance is consistently gaining traction because people are convinced that it is a good investment. VUL is a total package that lets you benefit from its insurance and investment components simultaneously.

    Indeed, VUL insurance is highly suited for individuals who want to place their money in a profitable venture, so they can gain more than what they’ve paid for.

    What is VUL, and How Does It Work?

    The term variable universal life (VUL) combines the principles of variable life insurance and universal life insurance. Both types of insurance come with an investment component, but universal life gives policyholders the option to invest and adjust their insurance coverage with more flexibility.

    Here’s how it works.

    VUL insurance is insurance with investment, which means a portion of the premiums you pay is invested in mutual funds, bonds, or stocks. This approach allows you to build your investment assets, creating a cash value for your policy over time.

    Suppose the cash value of your VUL insurance performs well. In that case, the death benefit in your policy may also increase—which is why VUL is also known as variable appreciable life insurance.

    VUL is also a type of permanent insurance life product where you are protected or covered by your policy for a lifetime as long as your premiums are paid. VUL insurance comes with a death benefit to be paid to your beneficiary upon your passing.

    How is VUL Different from Traditional Insurance?

    As mentioned, VUL bundles insurance with investment or savings. This makes your monthly premiums higher since you’re paying for both your death benefit and the cash value of your policy.

    And just like having a savings account in a bank, having VUL insurance allows you to withdraw or borrow money from whatever cash value that your policy has accumulated.

    In traditional insurance, you also get lifetime protection under your policy but without the investment component. This means your insurance doesn’t offer you the potential to earn money from your premium payments. You only need to pay a fixed premium to accumulate a cash value for your policy and secure a guaranteed death benefit for your beneficiary.

    What are the Pros and Cons of VUL Insurance?

    Here’s a rundown of the advantages and disadvantages that can help you form a balanced perspective on VUL insurance:

    1. Flexible premiums vs. Rising premiums

      As a VUL insurance policyholder, you have the freedom to choose the amount of your premium or death benefit, as well as the frequency of paying your premium. You can even use the accumulated cash value from your investment toward your premium payments, provided the former is enough to cover the latter.

      On the flip side, if the cash value of your VUL insurance policy fails to meet pre-set targets, there’s a possibility that your premium will increase to ensure that the policy coverage remains in effect.

    2. Potential for high ROI vs. High-risk investment

      VULs may give you a higher ROI than the cash value offered in traditional insurance since part of your VUL assets are invested in stocks or bonds. This can open up opportunities for your investment to grow over time.

      However, you should also consider that the highly volatile stock and bond markets might affect your VUL’s potential to give something back out of your investment.

    3. Policy loans vs. Policy lapse

      You’re allowed to make partial withdrawals or take out a loan from the cash value of your VUL insurance, but as you may expect, it comes with inevitable consequences. Diminishing cash value may put your VUL insurance at risk of a policy lapse. Hence, it’s important to pay back your loans on your policy on time.
     

    So, Should You Get VUL Insurance?

    VUL insurance is one of the most popular types of life insurance because it allows policyholders to hit two birds with one stone—you can use your premium to have insurance coverage and receive some cash value after some time. If these benefits match your personal finance goals, then you have the perfect reason to get VUL insurance.

    Making financial decisions requires help from professionals. When it comes to VUL insurance, you can get expert advice from BPI AIA Bancassurance Executives.

    Did you know?

    You can buy a life insurance at any BPI branch nationwide! Talk to a bancassurance sales executive now!

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    Protection

    Get the power to protect yourself and your family with an affordable life insurance plan. Life Ready Plus is easy on the budget, but offers coverage of up to 30 times your yearly payment to support the financial needs of your loved ones.

    The plan gives you fast access to coverage and benefits and can match your long-term financial goals when maintained within an appropriate term.

    Philam Life Vitality

    Critical Care Max

    Health

    Critical Care Max will help you make more memories by providing financial aid during the early stages of a critical illness. This unit-linked life and health insurance plan offers assistance on your recovery. You can build a health fund that grows over time, depending on your chosen investment, to pay for other medical costs.

     

    In addition, it comes with a hospital confinement benefit that will replace lost income due to hospitalization. This daily cash benefit may also come with optional benefits like cash payout for surgery-related expenses, allowance for consultation fees, and many others.

    Philam Life Vitality

    Build Estate Plus

    Life Protection

    Let your loved ones enjoy the fruits of your labor even when you’re no longer around. Build Estate Plus is a unit-linked protection plan that will cover your estate taxes after your passing so that you can ease your family’s burden.

    It doubles as an investment savings fund that builds Account Value as you pay. It is also integrated with AIA Vitality that provides additional upfront coverage of 20% to your policy and add-ons.

    Philam Life Vitality

    CRITICAL CARE PLUS

    Health

    Be in good hands in times of sickness. Let Critical Care Plus, a unit-linked health and life insurance plan, take care of you with financial aid in case of a major illness, so you can focus on getting better and spending more time with your loved ones.

     

    It even gives you more benefits for having good health through the AIA Vitality program that adds 20% upfront coverage and supplemental benefits on your policy. 

     

     

    Philam Life Vitality
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