Variable Universal Life Insurance Unique Features

2007-03-08 10:33:40

( Insurance )



Variable universal life insurance (also called cash value life insurance) is a combination of universal and variable life. The product's policy framework comes from universal life concepts; its chassis for delivery derives from variable life's investment flexibility. In combining these two insurance policy designs, insurers are able to offer a hybrid policy that gives you unique financial benefits over your lifetime.

Death Benefit Options

Generally, there are two death benefit options available under variable universal life insurance policies. In most cases, you can write a request to the insurance company if you decide to change from one option to the other.

Under the first option, your beneficiary receives the death benefit which is the sum of the amount at risk at the time of death and the cash value or account value. In case you take out a loan of your policy using its cash value as collateral, there's a tendency that the death benefit under this option will be less than the contracted amount.

Your second option allows you to specify that the amount at risk should remain constant even while cash value increases. The death benefit will be the amount originally contracted for plus the cash value at the time of death, without any possibility of diminution.

Investment Component

The variable universal life insurance investment feature gives you the option to choose an investment fund that fits the investment profile you want; if you choose several funds, you can instruct your insurer to move your money from one fund to the other. The policy also allows you to put the cash value in common stock investments, or specific funds that invest in bonds, international market, growth stocks or money market. A good feature of the variable universal life insurance is that the interest earnings on your investment portfolio are tax-free income.


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