Variable Universal Life Insurance

Variable universal life insurance combines features of variable life and universal life insurance. You can pay flexible premiums, which gives you the opportunity to change the death benefit of your policy, to increase or decrease, in order to suit your insurance needs.

Like other types of permanent life insurance, variable universal life insurance may also build up a cash value. This cash value is a tax-deferred investment. You may be able to use this build up of cash value as a reserve to either lower your premiums or build up your death benefit.

The main similarity with variable life insurance is the option of investing a portion of your premiums in mutual funds and riskier investments such as stock and bond subaccounts. Ultimately, the investment performance of these securities determines the cash value of your policy.

With variable universal life insurance some of your invested premiums are put into a separate account. The life insurer adds these funds to its own low-risk investments. As a result, there is less fluctuation in the cash value of a variable universal life policy than a variable life policy.

The above information is educational and should not be interpreted as financial advice. For advice that is specific to your circumstances, you should consult a financial or tax adviser.
Next, we'll take a look at cash surrender value.