Pros and Cons of Variable Universal Life Insurance

Variable universal life insurance is a type of permanent life insurance.It has flexible terms and investment possibilities. With a variable universal life insurance, you can change, within limits, the death benefit and the timing and amount of your premiums. It also lets you invest your cash value in professionally-managed funding options that reflect the performance of underlying investments such as stocks and bonds.

Flexibility is one of the benefits with variable universal life insurance. . You can decide how you want to pay the premium. According to your need, you can vary the premium payment within limits. You can also stop and restart the payment.With Variable universal life insurance, it is also easy to change the benefit amount.Variable universal life insurance policy usually have various investment options that you can choose from including stock funds and bond funds. You can also allocate your money in the fixed account.

Tax benefit is another great advantage with variable universal life insurance.The death benefit is free of federal and state income taxes. When you make transactions among different investment options, no income tax is due.When you use the policy’s cash value in the form of a loan, any gains you may realize will not be considered taxable income so long as your policy remains active.

Since variable universal life insurance allows you to allocate your cash value in many different funding options including stock funds and bond fund, it gives you the opportunity to grow your asset, which can be used for many purposes, including paying premiums, funding a college education, or supplementing your retirement saving, and etc. But as with any investment, the cash value of the funding options will fluctuate with changes in market conditions. There is growth potential, but also risk of loss. Another concern is that although variable universal life insurance is a very flexible product, skipping or postponing premiums can affect your policy’s cash value and death benefit, and may cause increased premium requirement later.

As variable universal life insurance usually requires long term commitment from the investors, you need analyze your long term goal and financial situation before you make the investment.