Here's Why You Should Choose VUL Insurance Over Whole Life Insurance

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Have you prepared for the future?

From our previous article, we mentioned why Variable Universal Life (VUL) insurance is a great investment for beginners. But what exactly is VUL insurance? We’ll explore the basics of what it is, VUL insurance pros and cons, and why people choose these types of plans over whole life insurance.

 

What is VUL insurance?

vul insurance pros and cons

Source: Unsplash

It’s a type of permanent life insurance that rolls an investment portion and an insurance portion into one package. 

Since it’s permanent, the insurance does not expire as long as you pay your premiums on time. But the terms of a VUL insurance plan will be different according to your family’s needs pre-and-post death.

It has become a popular choice for many people with families due to being able to offer both an insurance plan, as well as having a fund that grows over time. And upon death, beneficiaries get a tax-free death benefit payout. 

Typically, people are allowed to make a minimum monthly investment of Php1,500-Php3,000.

Another type of permanent life insurance is whole life insurance. There are slight differences in whole life insurance plans, but people who choose whole life opt for more stable returns. We’ll look at why you might want to take out a VUL insurance plan over 

 

So what are the VUL insurance pros and cons compared to whole life insurance?

 

Flexible premiums

vul insurance pros and cons

Source: Sunlife Philippines

One of the biggest attractions of VUL insurance is the flexible premiums you can get. This means you may pay a lot lower on your premiums compared to term insurance, or even whole life insurance which is fixed. You can choose to have higher or lower premiums by raising or lowering the death benefit. This can be useful in times when you need a portion of your income to spend elsewhere and you can take a hit on the premium. 

People might prefer whole life insurance plans because it’s a safer option since the premiums are fixed and you won’t have to revisit the schedule as often. Sunlife offers both types of permanent life insurance plans to match your needs.

 

Ability to withdraw cash

People like the liquidity of VUL insurance plans, such as the Sun MaxiLink Prime. You can withdraw the investment part of your plan tax-free and interest-free. This can be very useful when you need to pay off emergency bills

 

A wider range of investment options

vul insurance pros and cons

Source: AXA Philippines

If you aren’t sure what you will be spending your money on, a VUL insurance plan can be good to invest in many different types of securities, like the AXA aXelerator plan.

However, the same feature can also be a big drawback. If you’re not an experienced investor, it might be difficult and complicated managing so many securities in the investment portion since it acts like a mutual fund.

 

Health insurance through riders

VUL insurance plans have recently gotten better thanks to the optional additions called riders. With riders, you can have an element of health insurance coverage as well. Your premiums can be waived if you’re diagnosed with a critical illness like kidney failure or cancer.

 

Guaranteed death benefits

vul insurance pros and cons

Source: Manulife PH

Both whole life insurance and VUL insurance offer tax-free death benefit payouts to beneficiaries when you pass away. But the biggest difference is that VUL has no guarantee on its value of the payout, while whole life does. Since the premiums are static, the plans guarantee annual growth. However, VUL insurance only offers a temporary guaranteed death benefit which depends largely on the performance of the investment portion. Check out Manulife for their different options to compare the guaranteed death benefits.

 

So in summary, people might want to choose whole life insurance plans for long-term stable goals. It’s advisable to buy these when you’re younger so you can pay long-term in affordable amounts.

VUL insurance is better for people with more capital, as they can afford the higher premiums. The growth potential is much higher as well thanks to the investment portion.

However, if you’re risk averse and prefer a more stable plan, whole life might be better for you.

 

With our list of VUL insurance pros and cons compared to whole life insurance, start making wise investments now!

Read more articles below:

A Beginner’s Guide To Good Investments In The Philippines

How Should A Woman’s Investment Portfolio Look When She Turns 30?

Here’s Why We Must Demand For Better Insurance And NOT Settle For ‘One Size Fits All

Written by

Vinnie Wong