Best & Cheapest, How to Review Your Life Insurance Coverage in 2018, participating whole life insurance policies. A variable universal life insurance policy combines the benefits of a variable policy with a universal—or whole life—policy. Sometimes a very high rate of return will be used to illustrate a policy, such as 8% to 10%. Beyond that, the other major benefit whole/universal life insurance offers is that the premiums have the capability of growing as cash value over the life of the policy. When the market is down, the insurance costs will rob an even higher percentage of the total cash in the policy, and limit future growth. The biggest issue that owners of variable life insurance policies encounter is that  a variable universal life insurance policy is not guaranteed to stay in force for the full lifetime of the policy owner, even if they have been making their scheduled premium payments all along. The flexibility that a universal life policy provides is a key differentiator over whole life. It’s sort of like an IRA, just better. Whole life insurance Universal life insurance; Lifelong protection Fixed premiums Flexible premiums Builds cash value Investment component Guaranteed death benefit Fixed interest rate Variable interest rate Tax-free withdrawals and loans Dividend payments Policies available with a medical exam Learn more: Learn more: Protect your … Furthermore, you need to consider how your loved ones will be impacted after your death. Charges are quoted in “cost per thousand at risk”. While true to a certain extent, these policies use subaccounts. Take, for example, a situation in which you purchase a $500,000 VUL policy. I have written about variable universal life insurance policies many times in the past. Projects always assume straight line growth, but anyone who has invested money in the stock market that linear growth is the only thing you can count on never happening. Read more about term vs. whole life insurance. Most people do not understand how the policy is structured to work for their benefit when it is properly funded. The cost of insurance never rises, and dividend payments are often higher than illustrated, and the growth in cash value is slow and steady. In this article, we’re going to discuss the finer details of whole life insurance vs variable universal. People with a lot of money can use a variable universal life insurance policy as an investment account, which they can pass onto the next generation free of tax. Also, while insurance policies can sometimes be a good vehicle to save for college tuition, a variable whole life insurance policy is usually not. Like variable life insurance, there are sub-accounts in which you can invest. The vast majority of people looking at life insurance (99%) should focus their attention to Term Life or Whole Life insurance. But … Universal vs whole life insurance policies. Similarities of Whole Life and Universal Life. Regardless, most investors who want variable life products prefer the variable universal over the variable whole life because of the increased flexibility. In theory, a variable universal life insurance policy sounds like it has many advantages over a traditional whole life insurance contract. Unless you are an extremely sophisticated investor with trust planning needs, odds are that a traditional life insurance policy will fit your needs better. When the cash value reaches zero (or before then), you will get a notice from your insurance company saying that you will need to pay a higher premium, or your policy will disappear. A policy holder will pay insurance premiums into the cash value. 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