Variable Universal Life Insurance
This type of policy is more likely suited for people who take the driver’s seat while riding a car. The feature of Variable Universal Life Insurance (VUL) is a combination of Variable life and Universal life insurance. It offers a choice of the stated investment accounts, adjustable premiums and death benefits. The value or amount of the death benefit may increase or decrease, it will depend on the success of the investments a person chooses. The stock market fluctuates in a short span of time, if the values are down when a person dies, Variable Universal Life policies still guarantee a minimum death benefit to be given to the beneficiaries.
Variable Universal Insurance provides a policyholder more control of the cash value part of the policy unlike any other insurance type. Moreover the policy owner acquires all the risks inherited in the securities investments. All VUL products are then regulated by the Federal securities laws and SEC, therefore it must be sold with a prospectus. In order to maintain a death benefit guarantee a specific premium level should be paid every month. Maximum premium values are strongly influenced by the code of life insurance. The present or current version of VUL policies has different sub-accounts for the policyholder. The new generation of policies offers 50 or more different accounts that cover the whole spectrum of management styles and asset classes.
There are general uses of Variable Universal Life Insurance. One is financial protection, where in a family can be protected in case of premature deaths. Another use would be Tax advantages, in which they offer attractive tax advantage not only to those who have low tax brackets but especially to those who have higher tax brackets. Education planning can also be one use of VUL; it can help in funding children’s education, as long as the policy was started early. VUL can also be useful in Retirement planning; it can be used as tax-advantaged source of income upon retirement. Estate planning can be a good strategy to lessen or prevent estate taxes, in which a life insurance trust is set.
This type of insurance is more expensive type of Permanent Life Insurance compared to other types. Premiums should be high enough in order to cover the cost or amount of insurance, expense charges, and the expenses related to the underlying funds. A person should have at least a basic knowledge of securities, stocks, and bonds. Furthermore, it is important to understand the prospectus before investing. If a person buys a VUL policy, he or she is responsible of managing the investment accounts. It is better for younger policyholders that have long-term investment range. The success of the policy would depend on the investment made and can lose its value.
In order for VUL insurance to succeed, an issuer should make investments that are in accordance to the regulations applied within the country where the particular plan is offered. It means that the regulations that are used in monitoring investment activities on bonds, commodities, and stock are also the ones applied to the accounts where in the premiums are invested.