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.