Defining Variable Universal Life Insurance

June 26th, 2011 admin Leave a comment Go to comments

The variable universal life insurance is a combination of variable and universal life insurance. This is a type insurance product which allows a portion of the premium to be invested in the insurance company’s investment funds, enabling policy holders to gain tax-free investment returns, increasing cash value of the insurance policy.The variable universal life insurance is gaining increasing popularity due to the flexibility it gives to policy holders to invest as well as change insurance coverage with much ease.

In a variable life insurance policy, a major portion of the policy premium is invested in one or more separate investment accounts own by the insurance company. Policy holders will be able to choose from a wide variety of investment options, for example fixed-income investments, stocks, mutual funds, bonds, money market funds or others. The return of investments will increase the policy cash value. However, the amount of return will depend on the risk tolerance and investment objectives of the policy holders, insurance company and the investment portfolios.

The beauty of the variable universal life insurance is that the policy holders can also decide how to manage their investments by switching one investment to another depending on the insurance company’s policy and risk tolerance of policy holders.

Policies holders do not need to worry about the performance of their investments, as insurance company usually have a team of professional investment managers who supervise and manage investments for maximum returns. Policy holders need to only monitor the performance of the invested funds and eventually manage their risks. Depending on the performance of the investments, policy holders may decide to switch funds accordingly.

The variable universal life insurance is for everyone. For young policy holders, they may choose to allocate maximum premium to investments and invest in high return (and often high risk) funds as young policy holders have time on their side. For mature policy holders, they may choose to balance between insurance and investments due to many financial commitments. For much older policy holders, they may choose to allocate maximum premium to insurance and lower their investment risks as the bulk of their expenses are health and medical related.

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