Broadening the Appeal of Variable Universal Life Insurance through Flexibility and Protection

Heather Yonosh

By Heather Yonosh | February 24, 2020

Variable universal life is permanent life insurance that offers payment flexibility and lifetime coverage as long as minimum payment requirements are met.

For our part, Penn Mutual offers a broad portfolio of products, including variable universal life (VUL), to make it easier for a financial professional to help meet a client’s needs, wherever they are in life.

VUL: Upside potential over the long term

There are many permanent life insurance products available on the market, tailored to a person’s tolerance for market volatility. VUL policies may have the potential for significant upside, with the tradeoff of limited or no downside protection.  

The “variable” aspect of VUL offers the potential to build cash value through allocation to equity, bond, or money market investment options while providing death benefit protection. Your account value can change daily with market movements, since you’re allocating money among several investment options that are mutual fund-like. Yes, you may be taking on more downside risk, but your upside potential is also greater than typical of the other universal life options.

For that reason, VUL policies often appeal to a younger client, who can weather the short-term ups and downs of the market because they are seeking greater long-term growth. But what happens if your tolerance for risk changes?

Adding safety to risk

Variable investment options are complemented by the addition of indexed fixed account options inside some VUL products. These indexed fixed accounts can create an element of safety and flexibility for a VUL product.

Indexed fixed accounts typically earn interest based on a predetermined index, such as the S&P 500. There could be limitations on the interest credited, such as a cap, and enhancements to the downside protection, such as a floor. VULs may also offer a pure fixed account that’s not market-based, with accumulation that isn’t tied to a market index, but that offers predictable growth.

When talking to your financial professional, you may want to consider a VUL policy that provides quality investment options across every major asset class and category, ultimately delivering on a diverse suite of allocation options. Given VUL allows for reallocation among the investment options within the product, you may also want to check to see if the product you’re considering offers the ability to change investments throughout your life as your needs change — without facing charges or tax consequences. Find out whether the product offers options for fixed interest or market-based growth potential with no risk of loss due to market performance.

VUL is a life insurance product that could offer the most diverse suite of allocation options, providing clients with unique flexibility and diversification potential.  Talk to your financial professional for more details on VUL and whether it has the potential to meet your needs.

Standard and Poor’s 500 Index (S&P 500) is an unmanaged, capitalization-weighted index of 500 stocks from a broad range of industries, considered to be representative of the stock market in general.  Indexes do not have sales charges and it is not possible to invest directly in an index. 

Variable Universal Life products are sold by prospectus. Before investing, investors should carefully consider the investment objectives, risks, charges and expenses of the variable life insurance policy and its underlying investment options. The current contract prospectus and underlying fund prospectuses, which are contained in the same document, provide this and other important information. Please read the prospectuses carefully before investing or sending money.

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