Variable Universal Life Policies Vs. Whole Life Insurance


If you're in the market for life insurance, you can choose between term life, which lasts for a specified period and builds no cash value, or more expensive permanent life plans. Two common types of permanent plans include whole life and variable universal life. Several factors can determine which type may be the right choice for you.


Both variable universal life and whole life plans are known as permanent life policies because they are designed to provide protection for your lifetime. While both plans build cash value, whole life builds a guaranteed cash fund as you continue to pay premiums. Variable universal life invests in securities like stocks, meaning that the value of your cash fund could fluctuate. Variable universal life also offers greater flexibility in premium amounts.

Access to Cash

Variable universal life and whole life offer access to the accrued cash fund. With either policy, you can take the cash in the form of a low-interest loan. While the money does not need to be repaid, failure to do so will lower the death benefit (the amount paid to your beneficiaries upon your death). Unlike whole life, variable universal life offers the option to make a direct withdrawal instead of a loan, although you may have to pay taxes on some or all of that amount.

Premium Flexibility

Whole life requires you to adhere to a strict premium schedule for the duration of the policy. Missing a payment could result in the policy's termination. With variable universal life, you may be able to pay premiums from the accumulated cash value, if it covers the costs. You can also make additional contributions to the cash fund to take advantage of periods when the cash fund investments are performing well.

Risk Tolerance

Risk tolerance is a determining factor in whether you select whole life or variable universal. With whole life, there is no "mystery." You are guaranteed to receive a specific death benefit and cash value as long as you follow your policy's premium schedule. With variable universal life, factors like economic performance, your investment selections and the amount of premiums you pay will directly impact your policy's value over time.

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