Variable Universal Life Insurance
Variable universal life insurance combines permanent life coverage with investment linked subaccounts, offering market exposure alongside flexible premiums and the potential for investment gains or losses.
Permanent Coverage With Investment Subaccounts
Variable universal life shares the flexible premium structure of universal life. Its defining feature is that cash value may be allocated among investment subaccounts, which are separate accounts that invest in portfolios such as stock or bond funds. The cash value and, in some structures, the death benefit vary with the performance of the subaccounts chosen.
Because the cash value is tied to investment performance, it can grow more than a fixed credited rate would allow, but it can also decline.
Market Exposure and Potential Losses
Variable universal life involves investment risk. Subaccount values fluctuate with the markets, and poor performance can reduce cash value and, depending on the policy structure, the death benefit. It is possible to lose money, including amounts previously paid as premium.
These policies carry policy fees, subaccount charges, and insurance charges that reduce net returns. Understanding the full cost structure is part of evaluating whether the product fits your objectives and risk tolerance.
Suitability and Disclosure
Variable products involve investment risk and require appropriate licensing and disclosures. They are subject to securities regulation, and their sale requires that the product be suitable for the purchaser based on their financial situation and objectives.
We describe these products at a general educational level here. Whether a variable product is appropriate for you depends on your circumstances, risk tolerance, and the authorizations held by the firm, all of which should be confirmed directly.
Cash Value and Access
As with other permanent policies, cash value may be accessed through policy loans or withdrawals, subject to policy terms. Doing so may reduce the death benefit and cash value, may create lapse risk, and can have tax consequences. Variable products add investment risk on top of these considerations.
Our Approach
We help you understand the investment risk, cost structure, and policy terms before considering a variable product. For some clients seeking market exposure within a permanent structure, it can make sense. For others, the risk is not warranted. The decision should rest on a clear understanding of what could go up and what could go down.