variable universal life insurance

4 February 2021 Category: Life Insurance

All You Need to Know About Variable Universal Life Insurance

Variable life insurance is a common term in the world today. Some people appreciate the importance of this type of insurance, while others don’t like talking about it.

Some people believe life insurance isn’t worth the money or isn’t meant for them. In most cases, people who reach these conclusions haven’t looked into the available options for themselves and their loved ones.

The term life insurance and whole life insurance are the most typical policy types. However, there is a new concept you may not have heard of called variable universal life insurance. This article provides essential information about the same.

Understanding  Variable Universal Life Insurance

This is a form of permanent life insurance policy with a built-in savings component that allows for cash value investment.

The cash value is simply a part of your policy that accrues interest and can be availed by you in the form of borrowings or withdrawals. In variable universal life insurance, insurers regularly apply a fluctuating interest rate to the individual’s cash value growth.

Note that variable universal life insurance combines features from universal life insurance and variable life insurance. The universal life insurance plan offers individuals an increase and decrease in premiums depending on whether the predetermined interest outgrows the market.

The variable life insurance premiums are constant. It’s a contract between the individual and his or her insurer. This premium meets specific insurance needs, tax planning objectives, and investment goals.

Individuals Who Benefit from a Variable Universal Life Insurance

Variable universal life insurance is an impressive policy. It primarily benefits those consumers who know the amount of life insurance they need but want more from investment gains. The premiums fluctuate, and there is a possibility of losing the plan’s cash value, so it could be more suitable for those who take risks.

How Does Variable Universal Life Insurance Work?

Before picking a variable universal life insurance policy, the first advisable step is understanding the main components of the plan. The conventional way these premiums work is that every time the individual makes a premium payment, a certain percentage is used for keeping the death benefit in place. The rest of the premium goes to the cash value of the policy.

Once the cash value is in the plan, it can be invested in several types of securities that look like mutual funds. If the cash value remains impressive, individuals can use it to increase the death benefit, withdraw cash, or as loan collateral.

Ups and Downs  of Variable Universal Life Insurance

There are several advantages of a variable universal life insurance premium. One of them is that the plan offers an income-tax-free death benefit payout to the beneficiary. Also, all gains in cash are tax-deferred. This policy’s significant downside is that it doesn’t provide guarantees like whole life insurance or term life.

Choosing to buy a variable universal life insurance plan can be tricky if you haven’t researched the different life insurance products available. However, it has the advantage of flexible premium payments, which may decrease throughout the policy’s life. Contact our agents at Massive Insurance and Financial Services today to find out how we can help you with variable universal life insurance.