Variable Universal Life vs. Term Insurance

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Variable universal life and term life insurance policies are two very different concepts and should be treated as such. Learn about variable universal life insurance versus term insurance with help from a financial industry expert in this free video clip.

Part of the Video Series: Life Insurance Lessons
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Video Transcript

Hi, my name is Phil Cioppa. I'm the host of the nationally syndicated radio program, "The Phil Cioppa Show." The question comes to us today what's the difference between variable universal life and term life insurances. Well variable universal life is an animal that was created in the latter half of the last century and basically what it is is it's a cash bearing policy. In other words, you can build up cash but you are taking on the risk and why is that? In a variable universal policy the funds that you choose whether they be mutual funds, whether they be exchange traded funds, whether they be stocks or bonds, that's what's underlying the investment that you are putting into your policy. In other words after the premium is paid the rest of the money that you are putting in there goes into a pot which will either grow or decline depending upon what happens with those funds that you have chosen. So you need to make sure that you are watching those funds and you need to rebalance those funds. This is a very important insurance policy and it's a very powerful insurance policy but it needs to be one where you understand completely the risk that you are taking. The death benefit will always remain there but the cash is what will vacillate depending upon the funds that you use and of course, term insurance, the insurance company takes on all of the burden. It takes on any kind of risk that's involved and your policy is only good for the number of years that you bought it for. There is no cash balance, there is no increase in cash along the way. When it's done, it's over and you would need to get some more insurance. So variable universal, great potential in gaining cash with death benefit, term life, no cash benefit but always a death benefit. Thank you very much.


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