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Variable Universal Life Insurance

The introduction of variable universal life insurance into insurance companies has brought about a kind of comforting feeling into the minds of those who want to invest some money through a life insurance policy.

Let me give you a little history as to the evolution of the variable universal life insurance policy, how it all started and why you may need to give it some thought

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Variable Universal Life Insurance

The whole life insurance policy used to be regarded as the best type of life insurance to buy. Even though term life insurance has been available for a long time many people could not bear the thought of paying out money for a benefit that would only be realized after death.

Whole life always had cash values which availed people of loan possibilities and if you chose to surrender the policy you would get back some money…

After giving the matter of insurance some thought, aided by a strong campaign on the part of one particular life insurance company, people began to realize that because life insurance was intended to take care of those you leave behind after death term insurance may be a better idea than whole life insurance.

Term is cheaper than whole life and for only a few dollars you can own a very large amount of life insurance. It began to sell like hot bread…

The life insurance companies got into a type of war to see who could create the best term policy and still make a profit. The investment savvy people bought term and invested in mutual funds, money market accounts, stocks and bonds. Some lost their shirts and some made a profit. There were other people who neither saved or invested any money at all.

This is about the variable universal life policy. Bear with me…I am getting to that.

Then someone came up with the bright idea to create a policy that would combine saving and life insurance. They called the new policy universal life insurance. It had a death benefit through the term insurance and through the saving portion of your premium people now had a cash value.

They soon saw that there was not much return on their money so they created a variable life insurance policy which in essence combined whole life insurance with investment properties. You could choose where you invested your money…

These people soon found that if you combined the better aspects of universal life and variable life you could create the most awesome policy the life insurance had ever known. It is called variable universal life insurance.

Here is what the policy looks like:

Variable Universal Life Insurance Description.

Variable universal life insurance combines permanent life insurance with a diversified investment portfolio. You have the option of deciding how much of your hard earned dollars go into investments and how much is applied to the purchase of life insurance.

This life insurance lasts for as long as you live even if it is to age 100. Upon your death your beneficiary will be paid the death benefit of the policy in one lump sum or in the form of a monthly income. The death benefit in most cases is paid out free of income taxes.

A portion of your premium, you decide how much, goes into growth oriented investments chosen by you. You can choose from varying portfolios including stocks and mutual funds.

Advantages Of Variable Universal Life Insurance.

  • Level death benefit which is most cases is payable free of income taxes.
  • Life insurance coverage that you can increase or decrease at will. It is important to note that evidence of insure-ability may be required to increase the death benefit.
  • Growth oriented investment. Take note that with any high yield investment there is some risk.
  • Earnings grow tax deferred.
  • Built in cash values.
  • Available loan value, usually limited to 80% or90% of cash value.

Disadvantages Of Variable Universal Life Insurance.

  • The base policy is permanent life insurance which makes this policy a little pricey. Because of the investment element it may be worth the extra payment in the long run. Term is cheaper but there is no investment attached.

You can add the waiver of premium rider which is only applied to the portion of your premium that pays for the insurance. You can also add the accidental death benefit rider.

In order for an agent to sell this type of insurance s/he is required to have a license to sell life insurance in his State as well as a NASD licence. Variable universal life insurance policies can only be sold by prospectus. Read it carefully before investing your money.

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