Variable universal life (VUL) insurance falls under the permanent protection policy category. In simpler terms, this policy is both an insurance and an investment.
As permanent insurance, it covers the policyholder’s entire lifespan. VUL insurance also protects your loved ones from the consequences of sudden income loss. There are living benefits wherein you may withdraw the dividends or borrow against the cash value it already built over time.
Nonetheless, this insurance type also has little-known benefits brought by the specific product-related evolutions.
VUL insurance offers comprehensive living benefits and more.
Generally, this policy offers protection against uncertainties. But, of course, policyholders need to balance cost-effectiveness and guaranteed protection and growth potential. The options for riders are also paramount to protecting one’s health as an adjunct to other insurance policies.
Some VUL products offer or provide little-known benefits, including:
- Optional rider for critical illness
- Optional rider for long-term care
- Maximized cash value
- Withdrawal value
- Additional savings up to 25% on premiums
- Tax-efficient cash accumulation
- Other financial rewards
- Other intangible benefits
VULs aim to provide for the person’s specific needs, not just in terms of the length and total cost of coverage and premium amounts. This also applies to opportunities that grow the policy’s cash value, making this product appealing to a wide range of financial goals.
For instance, some insurance companies offer quarterly or annual premiums with additional benefits like lowered amounts. The policyholder may allocate such savings to other riders or another policy. Whichever it is, a VUL policy has this layer of benefit—though this is true for the majority of insurance products.
Furthermore, the coverage has other financial rewards. For instance, the withdrawable cash value can be used to fund a college education or retirement. These are tax-free partial withdrawals, which means you, as the policyholder, can already reap the benefits of having VUL insurance. If you decide to obtain a loan against the cash value, tax benefits also apply since these are tax-free loans.
Some VUL insurance products have other riders that allow the policy owner to allocate the excess portion of the cash value to other additional investment units. This happens during robust investment performance wherein the ash value may even exceed the guaranteed benefits.
When the health crisis happened, grace periods are extended to the policyholders to help them throughout this financial difficulty. This is where VUL insurance’s greater flexibility helps. If you cannot pay for the monthly premiums, the insurance company will simply deduct the premium(s) from its cash value. Of course, it should be enough to cover the said payment.
Peace of mind, an intangible asset, is the biggest benefit, knowing that you and your loved ones’ future is well-protected. You can live a less stressful life if you need not worry about unexpected events, including losing a job, contracting an illness, or getting injured.
In sum, aside from the benefits mentioned above, one benefit that has the most significant impact is the possibility of designing the policy based on his or her protection needs. Such greater optionality can lead to having a VUL insurance that works best for their future needs.