What is Variable Life Insurance?

First of all, why are you buying life insurance? The basic rationale for life insurance is to replace your income in the event that you die unexpectedly. Your insurance policy then is supposed to “buy” your dependents’ time to replace the income they had depended on you.

Strictly speaking, life insurance is primarily for protection, not an investment or a savings plan. However, today’s insurance companies offer products with savings plans and investment features. These are what you call variable life insurance.

Variable life insurance vary from one insurance company to another. These insurance companies customized their insurance products to suit their clients needs. There are insurance products that give you the amount of your insurance coverage at a fixed time in the future in case you don’t die during that stipulated time. Protection aside, variable life insurance also give you profit based on the performance of the insurance companies’ investments.

The bottom line for variable life insurance is that these insurance products combine life protection and investment benefits with premium payments. In such cases, you need to know how much of your premium goes to protection and how much to investing. You should ask these to the insurance agent when getting a variable life insurance product. When you understand exactly how much yield you will earn on the investment portion, you can decide whether it’s better for you to just buy term life insurance and invest the difference yourself – assuming you are financially literate enough to know what are the other investment options.

If you are interested in this kind of investment, contact me at [email protected] or at +639175227088.

Here is a video from Pesos and Sense explaining more about Variable Life Insurance:

Tyrone is a passionate financial literacy advocate. He started this blog on November 2008 when he watched The Secret which talked about Law of Attraction because he wanted to become a millionaire and wanted to know how a millionaire acts. At the age of 26, he achieved his first million. To find out more about him, click here or follow him at Instagram

20 responses on “What is Variable Life Insurance?

  1. I was offered both life insurance and a mutual fund both in one product. I have a wife and kid and I’m 25, at that time I really couldn’t decide what’s right for me and my family. We don’t really have any investment right now that could replace my income. I may still be working 3 to 5 years from now so… Would it make sense to have availed of the product in my situation?

    • Hi Tim, that’s exactly a variable life insurance product. The “savings” component takes the form of a mutual fund.

      I would suggest that “YES”, it is advisable for you to avail it. Just be sure you are buying it from a reputable and financially strong insurance company.

      The insurance form will protect your dependents (wife and kid) and the savings form can be used for future like education of your kid, etc.

      I would advise just in case you availed to ask the insurance agent as to what’s the percentage of the premium that goes to the “insurance” and “savings” form of the product. I think for you, since you are young, the better choice would be higher on savings than on insurance. I hope this helps.

  2. Hey Tyrone, I think I might have signed up for this kind of insurance, which will take me 5 years to pay. At least I also get some payoffs after some time. I think this is a better deal than just let my money sit in a bank earning very very meager interest. 😀

  3. Having no dependents, I did not think I would need insurance. I thought it only offers death benefits with tiny living benefits called dividends. I learned that what I only knew was the traditional life insurance.

    I recently got a variable life insurance not just for protection in case of demise or disability but for critical illness as well. It’s great if I don’t die or get sick soon and even more wonderful because there’s money for me with the plan also acting as an investment.

    Yes, initially, only a certain percentage of the premium is allocated to buy units of investments, but after about 2 years of paying, 100% of my premiums will be allocated to buy investment units. I can also specify the percentage of premiums that will go to bond funds, managed, growth, or equity funds. I chose equity funds (stocks) because of greater potential rewards and am in it for the long term. I can also redirect premiums from equity to bond fund, for example, or vice versa. It IS variable, lots of flexibility, unlike traditional plans and without the minimum investment amounts as with UITFs. Premiums can be as low as 1,000 pesos a month.

    Yes, you can ask your insurance agent about it. Just make sure he or she is licensed to sell and familiar with variable plans, not just traditional life.

    Dying young or living to old age, we need money in both cases. I think life insurance is the only product that you should buy when you don’t need it because you can’t buy it when you already need it.

    • Couldn’t agree more with Annette on this: “: I think life insurance is the only product that you should buy when you don’t need it because you can’t buy it when you already need it.”

    • Annette is right. “life insurance is like umbrella. You don’t need it until it starts to rain but if you don’t have it with you its too late to go home and get it.”

  4. Hi, me and my husband we’re offered a VUL. The benefits sounds good. We’re informed that 3% of the investment will go to insurance premium. Is this already acceptable?

    a. lock-in period is 10y
    b. one time payment but can do top-up.

    • i didn’t know VUL has a lock-in period. you can’t touch fund value for 10 yrs? or is this payable for 10 yrs or just single-pay VUL? got confused there.

  5. Never buy a Variable Life Insurance.

    You can always invest the premium you are paying in a better yielding investment.

    The insurance company makes money by profiting from the spread. For instance, they might offer you an ROI of 3% but that they invest your premium that has an ROI of 7%. The difference of 4% yield is their profit, risk-free.

    Invest in Term-Life and use the premium to pay off debt. The avg. ROI on debt is 15%, which is far superior to the Variable Life insurance ROI.

    If you are debt-free, you are doing something wrong. You are not leveraging your money.

    • Life is not all about money. That is why variable life exists. You know you need a whole life insurance, but at the same time you kinda like to earn better yields as well. Hence enters variable life. Bow!

  6. If you know a better-yielding investment than what the insurance co. offers, invest there and just get term-life insurance which is cheap with high protection.

    If not, you can get a variable plan where the insurance co. protects your life and you can also get better yields than just parking your money ‘safely’ in the bank.

    Different plans for different people.

    • Getting term insurance and then investing the rest is not advisable. The problem is that people often forget to renew their term-insurance. They often wind up not having any protection at all when they need it the most. If your term insurance lapses and you forget to renew, you will probably have to undergo medical requirements to get a new policy, and your health condition might already have deteriorated at that point in time.

      Moreover, term insurance is only cheap at the start when you are young. As you age, the premiums go up too! When you reach your 50’s, the premiums will be quite high compared to a whole-life plan that you started out with when you were in your 20’s or 30’s.

      On the investment side, “if you know a better-yielding investment” comes with big IF’s. IF you know how to read stock charts, understand Relative Strength Indicators, Moving Average Convergence-Divergence, Bollinger Bands, Resistance-and-Support levels, Fibonacci retracements, fundamental versus technical analysis. IF you can DEVOTE time and effort to to track your investment every day when the market opens until it closes.

      IF you are a semi-professional trader, then you MIGHT just have a chance at generating a better-yielding investment. But then again, why risk it? Why not leave the decision making to professional fund managers who do such analysis and investing decisions for a living?

      Speaking of professional managers, you can opt for Mutual Funds or UITF, but why should you when you get the same fund management services PLUS income protection PLUS critical illness coverage PLUS total and permanent disability benefits with your Variable Life Insurance plan?

      This is why I’m a firm believer that most people should get a Variable Life Plan instead of buying term insurance and investing the rest.

  7. Term life is not an investment, it’s actually an expense. Yes, there are specific people who need term life, but generally, term life is payable yearly til around age 65 or 70. If the insured person dies at age 71, then the “sum insured” will not be given to the beneficiaries.

    Traditional whole life and variable life covers til the age of 100.

  8. Variable Life Insurance also offers living benefits such as critical illness coverage and total and permanent disability benefits. What this means is that if for example you’ve been paying for your variable life insurance for two years for P36,000 a year and you get diagnosed with cancer… your policy can advance a lump sum to you (e.g. P1,000,000.00) which you can use for the treatment of your critical illness.

    Similarly, if you get into an accident that leaves you totally and permanently disabled, your life insurance policy can give you a lump sum that can be used to pay for your day-to-day expenses and medical expenses.

    If nothing happens to you, you get to retire on the funds that were accumulated via the investment portion of your variable life insurance plan.

  9. In my point of view, Variable life plan is more attractive than the traditional life plan because it combines insurance and investment. Besides a face amount, VUL plans can also have riders which are very attractive in terms of features and price. VUL plans are perfect for educational and retirement planning.

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