What is Variable Universal Life Insurance?

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Asked November 7, 2011

1 Answer


A variable universal life insurance policy is one of the most robust savings vehicles you can get. It is a combination of life insurance policy, savings account and stocks portfolio. Variable universal life policies tend be more expensive than most types of life insurance, but no other life insurance policy offers such functionality. With a few good choices on how the premiums are invested, a variable life policy has the potential to generate a much higher payout than the actual face value of the policy.

With a variable universal life policy, you can make decisions on how your premiums are invested. The success of your investment choices can cause the cash value portion of the policy to rise or fall, but you are guaranteed a minimum cash payout even if you pass away when stocks are at record lows. As Long as you do have a positive cash value, you can also borrow against the accrued cash, effectively making yourself a tax-free loan.

If you can afford to purchase a variable universal life policy, it may be the most risk-free way to establish your financial independence. The trick is to buy the policy while you are in your 20s or early 30s, choose investment choices carefully and be prepared to wait on long-term cycles in the stock markets. Historically, all stocks rise over the long-term, and life insurance investments are definitely purchased for the long term.

Tax professionals will also advise you to assign the ownership to the desired beneficiary or executor of your estate. The disadvantage of doing this is that you will lose the ability to change the investments or borrow against the account without the approval of the assigned owner, but the benefit is that the value of the policy will not be taxed as part of your estate, effectively keeping the full value of the policy for the use of your beneficiaries.

Answered November 7, 2011 by Anonymous

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