Things to Know About VUL Investments in the Philippines

July 24, 2020
Investor's Guide

What to Know About VUL Investments

what to know about vul investments

What to Know About VUL Investments

Insurance can be a tricky subject. Many people find the terms confusing, causing them to be wary about investing altogether. We’re here to help you understand more about some of these terms to make them easier for you to understand!

What is VUL investment?

VUL, or Variable Universal Life, is a type of permanent life insurance policy with a built-in savings component that allows for the investment of the cash value. Like most other life insurance, the premium is flexible as well. It comes with a maximum and a minimum regarding the investment return you can get from your savings component.  

VUL gets its name from the varying results of investments in the market. Although VUL insurance offers flexibility and growth potential as compared to a traditional cash value or life insurance policy, it’s not without its risks.

How does a VUL work?

To answer that question, we’re breaking down some of VUL investments’ key benefits.

1. Flexible premiums

With VULs, a policyholder has the option of investing more than the stated premium. Anything you pay over the premium becomes an additional investment or is considered a top-up. The more you pay, the faster the fund value accumulates for the policyholder. This makes VULs ideal for those looking for investment opportunities for their bonuses or other windfalls.

Consequently, in case of let’s say, a recession or a personal financial crisis, a VUL plan gives the policyholder the flexibility to pay only the charges while still keeping the policy in-force. So as long as there is enough fund value to cover those charge, the VUL policy will not lapse. 

2. Potential higher returns

Since VUL assets are intrinsically linked to stocks and bonds, the returns of a VUL plan may exceed that of any other type of insurance policy. The average return for an equity fund is around 16.6% while that of a bond fund is 7.8%. Dividends and accumulation rates are also lower than ever, with signs indicating that they will go even further down. 

Although a VUL plan entails higher risk than other investment types, the higher return shows it is a good investment. 

3. Liquidity

A VUL allows the policyholder to access his or her funds in the event of a financial need. Unlike traditional policies, however, VULs treat these as withdrawals instead of loans, meaning the amount you take out does not incur any interest. On top of this, the amount you withdraw is not deducted from the face amount as well. We highly recommend, however, that the policyholder reinvests whatever amount he or she withdrew (whenever they are able to) to stay on track with their financial goals.

So is a VUL worth it? ABSOLUTELY. A VUL is one of the most flexible investments you can make. You can adjust your premiums at any time, and decide how much to invest, giving it the potential to grow faster than any other type of insurance policy.  

Invest in a bright future and talk to one of our advisors today about your VUL options.

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