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Variable Universal Life Insurance
Variable universal life insurance is similar to a regular universal policy in terms of the flexible premium options both offer. That is, you can increase your premium payments when you are able or decrease them during certain times of the year when you wish to preserve cash to pay for other things. However, variable universal life insurance offers you this added benefit – the ability to direct how your accumulating cash value is managed.
If you are not satisfied with the dividends an ordinary life insurance plan offers and want opportunities for increased growth, then variable universal life insurance may be a good option for you. This potential for accelerated growth in the cash value of the policy comes, of course, with increased risks. But you will have control over how your cash value is managed.
What to Look for in a Variable Universal Life Insurance Policy
Since variable universal life insurance policies are riskier, always ask for complete information when considering an insurance company. Ask for all fund prospectuses you can get and investigate every aspect of the policy (i.e., read the fine print), such as:
- options and risks
- administrative fees
- other expenses
Benefits of Variable Universal Life Insurance
Variable universal life insurance gives you greater control over the cash value of your policy than any other type of insurance. The good news is that, although the cash value of the policy (the death benefit amount) depends on market forces, a guaranteed minimum death benefit will still be paid to your beneficiaries upon your death.
Since variable universal life insurance has the features of a life insurance policy and a securities contract, variable universal policies are regulated by Federal Securities Laws and, therefore, must be sold with prospectuses.
The Tax Advantages of Variable Universal Life Insurance
Unlike term life insurance premiums that are paid with after-tax dollars, variable universal life insurance premiums can be paid with your pretax dollars. This means that you may be able to defer paying taxes on the portion of your income allocated as premium payment and can lower your overall tax liability each year that your variable universal life insurance policy is in effect.
Moreover, a variable universal life insurance policy may be able to give your surviving kin a death benefit COMPLETELY FREE OF TAX. Under this type of policy, it is very possible that you will never have to pay taxes on the portion of your income that goes into your variable universal life insurance fund. You can often get all the tax breaks, flexibility, and an access to policy withdrawals and policy loans at low repayment rates. However, since variable universal life insurance does come with a risk to your money, you may want to explore all your other options first.
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