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Pros and Cons of Variable Universal Life Insurance

Permanent life insurance with investment and insurance components is known as variable universal life(VUL) insurance. VUL insurance has some pros and cons of its own, just like financial produce. The pros of VUL are it is flexible, death benefit protection, Investment option, Tax advantages, and cash value growth potential. The cons of VUL insurance are it is depletion of death benefits, charge for surrender, Complexity, loss of coverage, lapse risk, fees, limited guarantees, and loss of coverage. Determining if it fits into your financial strategy can be made simpler by evaluating the advantages and disadvantages. Let us check out the pros and cons of variable universal life insurance to better understand this topic

Pros of Variable universal life insurance


Variable universal life(VUL) insurance offers policyholders the flexibility to adjust their coverage amount, premium payments, and investment options as their needs and financial goal change.

Investment options

VULs policies allow policyholders to invest their cash value in a variety of investment options such as mutual funds, stocks, and bonds. This can potentially result in higher returns compared to traditional life insurance policies.

Death benefit protection

VUL insurance provides a death benefit to beneficiaries upon the policyholder’s death, ensuring financial protection for loved ones.

Cash value growth potential

As cash value is invested in various investment options, there is a chance for the policyholder’s cash value to grow significantly over time.

Tax advantages

VUL insurance offers tax-free growth of cash value and tax-free withdrawals and loans. This can provide policyholders with potential tax advantages in the long.

Disadvantages of Variable universal life insurance

Depletion of death benefits

The death benefit left for your beneficiaries may be reduced if you borrow against or take from the cash value of your policy. That can cause your loved one to receive an unpleasant surprise after your passing.

Charge for surrender

You might be able to surrender the policy if you determine that variable universal life insurance is no longer the best option for you. However, depending on how long you have had it, doing so can result in a surrender fee.


VUL plans are more complicated than conventional life insurance products in terms of complexity. You will need to control your investment allocation and monitor the underlying investment performance. This needs continual attention and some amount of financial understanding.

Limited guarantees

Despite the possibility of larger returns, VUL plans do not provide the same levels of guaranteed cash value increase as conventional whole life insurance. This implies that there is more uncertainty over the long-term effectiveness of the policy.

Loss of coverage

If the policy investment component performs poorly, there is a chance that the cash value could be exhausted, which could result in a possible loss of coverage if you are unable to pay the premiums required to keep the insurance fund.


Compared to other permanent life insurance options scuch as universal life insurance, variable universal life insurance contracts typically have a higher fee structure. Therefore it is essential to balance prospective rewards against probable fees.

Lapse risk

If the policy’s cash worth is insufficient to pay the premiums, the policy could lapse. This can occur if the investment performs or if the premium payments are not kept maintained.

Thank you for reading this article. If you have any queries regarding our article on the Pros and cons of Variable Universal Life(VUL) Insurance then do comment in the comment section below.

Explore more information:

  1. Pros and Cons of Whole Life Insurance
  2. Pros and Cons of Health Insurance
  3. Pros and cons of Term life insurance 
  4. Pros and Cons Permanent life insurance
  5. Pros and Cons of HMO
  6. Pros and Cons of PPO

Author Profile

Jay Solanki > Expert Content Writer
Jay Solanki > Expert Content Writer
Jay Solanki is an expert writer with 8+ years of experience as a content writer. They specialize in making complex topics like insurance and technology easy to understand. Jay has written over thousands of articles to help people become confident about technology knowledge. Prior to joining Way2benefits’s editorial team in 2020, Jay worked as a Digital Marketing Expert and user experience researcher, producing content for US based firms.