Variable Universal Life Insurance: Pros & Cons


Buying the right type of life insurance can ensure that your family is taken care of after you are gone. Variable universal life insurance is a type of permanent life insurance that gives policyholders more options than a normal whole life policy. While this kind of insurance can be attractive, it does come with a few drawbacks as well.

Investment Potential

When you use a variable universal life insurance policy, part of the money that you pay in premiums is allocated to an investment account. You can choose what types of investments your money goes into and grow your cash value considerably. If you choose the right types of investments, it can increase the cash value and the death benefit of your policy. You can even opt to stop making premium payments if the investment returns take care of them.

Access Money

Another benefit of variable universal life insurance is that you can gain access to the money when you want. These policies grow a cash value and most insurance companies will allow you to borrow against that cash value as you please. You can then repay the loan over several years with a very low interest rate when compared with some of the other loans that you could use. You could also cash out the policy at some point and take the cash without having to pay it back.


One of the potential disadvantages of using this type of life insurance policy is that it can have higher costs than other policies. When you pay your premiums, part of the money will go towards the death benefit and another part will go towards the administration expenses of the policy. Besides paying the insurance company, part of the money will also be used for the expenses of the investment funds. This adds another layer of administration and cost.

Depends on Performance

While having the cash value of your policy depend on the performance of your investments can be a good thing when they perform well, it can also be a drawback. If you choose the wrong types of investments, the cash value of your policy could diminish rapidly. You may not have a large enough death benefit to cover your family's needs if you die unexpectedly. This puts pressure on you to choose the right types of investments for your policy.

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