Sara Routhier, Managing Editor and Outreach Director, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming world o...

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insur...

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Reviewed by Leslie Kasperowicz
Farmers CSR for 4 Years

UPDATED: Aug 6, 2021

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The Brief

  • Variable universal life (VUL) is a life insurance investment option
  • Variable universal life insurance offers a variable death benefit
  • VUL is for investors who are willing to take on more risky life insurance policies

What is a variable universal life insurance policy? A variable universal life insurance plan combines the changing premiums of universal life insurance with the asset options of variable life insurance.

Variable universal life is a life insurance investment option. It is made for individuals who are willing and able to keep a close eye on their assets, substantially finance a policy in its early years, increase the risk of their life insurance by including stock market risk.

Variable universal life has the highest potential growth of any life insurance, but it also has the highest level of risk.

Enter your ZIP code in our free quote comparison tool while you read this article to see what affordable variable universal life (VUL) insurance choices are available in your region.

What is variable universal life (VUL) insurance?

Variable universal life (VUL) insurance is a kind of permanent life insurance policy, which means that your beneficiaries will get a death benefit provided you continue to pay your premiums.

Some kinds of permanent life insurance have a cash value component that develops and earns interest with each premium payment.

VUL’s cash value is invested in a variety of assets (such as equities and bonds) that you choose.

If the interest on the cash value is greater than the cost of insuring you as you grow older, you may use it to help pay for part of your premiums.

If you wish to invest and have explored all other investment options, VUL may be a good way to diversify your portfolio while also providing financial security for your heirs.

VUL has a greater potential for cash value development than whole life insurance since you have more control over your investing choices.

On the other hand, a variable universal life policy is considerably more costly than a term life policy.

However, most individuals will receive similar or higher investment returns in a conventional 401(k) or IRA that is not linked to their life insurance.

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How much is variable universal life (VUL) insurance?

Because life insurance is intended to help your heirs after you die, you should think about their financial requirements when choosing a VUL insurance policy.

Funeral costs are another issue to consider, since many individuals want their life insurance to cover their funeral expenses.

Below are the average monthly rates for $250,000 of variable universal life insurance for non-smokers:

Variable Universal Life Insurance Rates per Month, $250,000, for Non-Smokers
25-35$100 - $140$78 - $120
35-45$140 - $221$120 - $201
45-55$221 - $364$201 - $340
55-65$364 - $659$340 - $571
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Depending on the conditions of your policy, you may be able to adjust the amount of your death benefit if your circumstances change.

If you decide as you become older that you desire a higher level of coverage, you should be able to make adjustments, but you may have to pass another medical test. You may also be able to reduce the amount of your death benefit.

What is the difference between variable life insurance and variable universal life insurance?

Variable life insurance and variable universal life insurance both offer a variable death benefit. The amount you get is dependent on the performance of your cash account investments. They also have certain characteristics in common, such as:

  • You decide what you want to invest in
  • Rates of return on investments in the stock market are not capped
  • You’ll be relying more on your investment expertise
  • There is a possibility that your investments may lose value

While there is some overlap, VUL and variable life are two separate products. Variable life insurance is similar to whole life insurance, while variable universal life insurance is more similar to universal life insurance.

At this point, you may be asking yourself, “What are the disadvantages of variable universal life insurance?” Let’s compare the pros and cons of variable life insurance and variable universal life insurance.

Pros and Cons of Traditional Variable and Variable Universal Life Insurance
Type of Life InsuranceProsCons
Traditional VariableTax-deferred income
Potential for higher return than whole life
Permanent life insurance (does not expire)
Death benefit can be increased as cash value grows
Can borrow or withdraw from the cash value
May be used to supplement retirement and other deposit accounts
Guaranteed death benefit
Riskier than whole life
Lower interest than other long term investments
Higher premiums than term life
Borrowing lowers the death benefit
Management and investment fees may affect cash value
May not have guaranteed rate of return, or it may be low
Cash value often isn't equal to surrender value for 10 - 15 years
Regulated investments can translate into higher hidden fees
Poor performance may lower the death benefit
Fewer investment choices offered than variable universal
Variable UniversalTax-deferred income
Potential for higher return
Can borrow or withdraw from cash value
More investment possibilities than traditional variable
Can voluntarily fund the account early to build the cash value
Can use the cash value to pay premiums
May be used to supplement retirement and other deposit accounts
Flexible premiums and death benefits
Governed by securities law
Combines life insurance with income growth
Lower interest than many long term investments
Difficult to manage investments
More risky than whole life and traditional variable
Subject to fluctuations in value based on market volatility
Higher premiums than term life
Borrowing lowers the death benefit
Higher premiums when investments are not performing
High surrender fees
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VUL is a hybrid product that combines investment with an insurance policy. Companies that offer variable plans must be registered to sell assets, such as equities, as well as life insurance, according to the federal government.

That should tell you that variable insurance is more complicated than standard insurance. It also emphasizes the market dangers that these plans entail.

If the market does not perform well, you may find yourself with no money in your bank account.

Where can I get variable universal life (VUL) insurance?

Variable universal life (VUL) insurance quotes are available from certain insurance providers. You may be asked for personal information such as your state or ZIP code, residence, date of birth, gender, height, and weight.

You’ll almost certainly be asked questions about your health and personal habits, such as whether you’ve ever been diagnosed with high blood pressure or high cholesterol.

You may also be asked if you have diabetes or depression or other potentially serious medical conditions.

If you’re getting a quote from an insurance provider, one of the first questions they’ll ask is whether you chew or smoke tobacco. If you have used tobacco, you may be asked to specify how long you used it.

Your driving record, hobbies, and profession may also have an impact on your variable universal life (VUL) insurance rates.

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Should I buy variable universal life (VUL) insurance?

Is variable universal life insurance a good investment? Policyholders with variable universal life insurance have greater power over their policies than those who hold other kinds of life insurance.

Variable universal life is the more common of the two “variable” choices. That doesn’t mean it’s a huge hit with the broader public. According to the American Bar Association, VUL accounted for just 7% of total life insurance premiums in the United States at the start of 2020.

Because “variable” types of insurance aren’t intended for (or the best choice for) most individuals, they have a limited market share.

VUL is for investors who are willing to take on more risky life insurance policies. A term life, whole life, or even universal life option will benefit most purchasers and allow them to sleep easier at night.

As you can see, VUL has its advantages and disadvantages.

You’ll be in control of your performance, but if you make bad investment choices, you may find yourself paying more than you anticipated or losing coverage altogether.

Find a variable universal life (VUL) insurance company in your area now by entering your ZIP code into our free quote comparison tool below.