Insurance plans have been around since time immemorial, but the VUL plan or variable universal life insurance is all the rage today. Not everyone has the right knowledge about this plan or the insurance per se. So, a lot of doubts and fears often surrounds it. If you want to know more about VUL plan and its benefits, here is a quick explanation about VUL plan and why you should try to invest in it.
Just like other investments, a VUL insurance policy also comes with pros and cons. Hence, you have to know everything about it before you begin putting your money in it. You have to understand what VUL is, its benefits, risks, and everything that comes along with it.
According to Money Max, VUL is a combination of life insurance and investment. It is a plan that offers living, death, and disability benefits with an investment component. In the Philippines, the usual partition of the premium's amount is five percent goes to the insurance cost, while 95 percent goes to investments.
So, what does variable mean in VUL, and how can it be permanent? Variable means the investment returns will vary depending on the rise and fall of the markets, where the premium is invested.
The permanent insurance policy, on the other hand, means VUL will remain active, and you will stay insured as long as you keep paying your premium. This differs from the usual life insurance that only lasts for a certain time. So, what are the benefits?
Flexible Premiums
Sun Life Financial Philippines noted the VUL plan offers flexible premiums. Policyholders have the option to invest more than the regular premium if they want to do so. The additional amount will be added to the investment or became top-up. This will result in the fund value to accumulate faster for the policyholder.
However, if a financial catastrophe happens, a VUL plan only allows the policyholder to pay the usual charges to keep the policy in force. As long as there is enough fund value to cover the charges, the policy will remain valid.
Higher Returns
Since VUL plan's underlying assets are invested to stocks and bonds, its returns may exceed that of other types of insurance policies. Since it started, the average returns for equity and bond are 16.6 percent and 7.8 percent, respectively. Dividends and accumulate rate are now down to four percent and, with the current economic situations, rates may continuously go low in the future.
Just like any investments, the VUL plan also has higher risks. However, the higher returns let the policyholders reach their goals faster or get a bigger fund than what is already set out.
Liquidity
VUL policyholders are allowed to access the fund value in case of financial emergencies. Compared to the traditional insurance plans, policyholders can withdraw money instead of loaning. The amount withdrawn will never pose any interest and will not be deducted from the face amount.
But, it is strongly advised that the amount withdrawn would be reinvested to keep the policyholders reach their financial goals. With all these things said, VUL plan helps its holders to save and invest at the same time.
