If you’re young and is ready to start investing, then you probably have heard or encountered the term “VUL” plan. Most millennials I know got offered with VUL plans by their financial advisors.
But what is VUL in the first place? Is it really an investment or an insurance plan?
Well, that is what we’re going to cover for today. We’re going to discuss VUL, its pros and cons, and whether getting a VUL is the right investment for you.
What is VUL?
VUL stands for Variable Universal Life Insurance, also known as Variable Unit-Linked Insurance, is a permanent life insurance with investment combined into one product. It provides you with living, death, and disability benefits plus with an investment component known as fund value.
Again, let me set this straight. VUL is an insurance policy with investment. It’s not the other way around, and don’t believe anyone who says so.
VUL is a permanent insurance policy, which means that it won’t expire and you’re insured as long as you keep paying your premiums. And since it’s a variable unit-linked insurance, it means that the investment returns vary depending on the market where your premium is invested.
Due to its insurance + investment concept, VUL has become a popular financial product in the Philippines for the fast few years especially to millennials and young investors. It provides them with the perfect financial protector whether they pass away early or live beyond their 60s. For example, if I die before I reached 60, my beneficiaries will receive all the proceeds from my insurance policy. But if I live beyond that, I can use the investment returns from my VUL plan to fund my retirement.
So why is VUL perfect for millennials?
- It’s perfect for young people who find it hard to save and invest since VUL forces them to set aside a portion of their monthly income for their premium payments.
- It’s perfect for young investors who are just learning about the ins and outs of insurance and investment.
- It’s for those who lack the time and discipline for investing.
- It’s for entrepreneurs who prefer investments with a bundled insurance policy to protect their assets.
- It’s for young parents who want to start building their children’s education fund.
So how much is a VUL?
Another reason why VUL is so popular with young investors and millennials is that it’s affordable. One can get a VUL policy for a minimum monthly investment of PHP 1,500 per month. That means you can get a VUL policy for as low as PHP 50 per day.
Are there any alternatives to VUL?
There young investors who want to separate their life insurance from their investments, or those who are more comfortable with the BTID (buy term, invest difference) insurance. BTID is cheaper compared to getting a VUL policy. But BTID needs financial discipline to monitor the market and know where they should invest their own and earn high profits.
While if your goal is to invest alone, then there are investment options like mutual funds, UITF, and stocks which offers flexibility when it comes to timing and strategies.
So is VUL Insurance a good investment?
Technically, VUL insurance is a good investment if you want to purchase life insurance with certain benefits, as well as investments. With VUL, you don’t only get your life insured, you also get to grow your money thru investments.
But again, before getting a VUL, make sure that you study your options thoroughly and learn more about it. This way you know exactly what you’re getting into.