What is Variable Universal Life Insurance?

Life insurance offers a way to support your loved ones financially after you pass away. Some permanent policies also build cash value over time, which you can often access while you're alive. Variable universal life insurance is a permanent policy that invests the cash value in market-based subaccounts.¹ While Aflac doesn't offer this type of insurance, we do offer term life and whole life insurance policies that can help meet your coverage goals. Read on to learn how variable universal life insurance works and how to determine if it's right for your needs.

4 min. read

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Key Takeaways

Variable universal life insurance is a permanent policy that lets you invest the policy's cash value in market-based subaccounts.²
Variable universal life insurance offers flexible premiums and high growth potential, but it can come with higher costs, market risk and added complexity.
While Aflac doesn't offer variable universal life insurance, our term and whole life insurance policies can help provide the coverage you need.

What is variable universal life insurance?

Variable universal life insurance is a type of permanent life insurance that includes a death benefit and a cash value component. Unlike some other permanent life insurance policies, a variable universal life insurance policy lets you invest the cash value in subaccounts that work similarly to mutual funds.

If your investments perform well, your cash value may grow faster. If they perform poorly, your cash value may decrease. As a result, these policies can be riskier than traditional whole life insurance policies.³

Some variable universal life insurance policies may allow you to borrow or withdraw funds from the cash value. However, if your balance falls below a certain level, you may have to pay higher premiums to keep the policy active.⁴

As with most life insurance policies, your beneficiaries can receive the death benefit when you pass away, as long as your policy is active and you meet its terms.

Variable universal life insurance pros and cons

Variable universal life insurance may offer greater flexibility and growth potential than other types of policies, but it also comes with greater risk.

Here are some pros and cons to keep in mind:

Pros of variable universal life insurance

Investment potential: You can invest the policy's cash value in subaccounts. If those investments perform well, your cash value may grow more quickly.
Flexible premium payments: Some policies allow you to adjust your premium payments within certain limits. You may also be able to use cash value to help pay your premiums, depending on the policy.⁵
Flexible death benefit: Some policies may allow you to adjust the policy's death benefit over time, depending on your insurer's rules and your coverage needs.⁶

Cons of variable universal life insurance

Market risk: Since the cash value is tied to investments, it can rise or fall with market performance, and returns are never guaranteed.⁷
Higher costs: Variable universal life insurance may have policy fees, administrative fees and investment-related fees. Additionally, if you borrow or withdraw funds from your cash value, your premium payments may increase.⁸
Added complexity: These policies may require more ongoing attention than term or whole life insurance because you'll need to monitor investment performance, cash value and premium requirements.
Potential policy lapse: If the cash value falls too low, you may need to pay more into the policy to keep it active.

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Should I get variable universal life insurance?

Variable universal life insurance may be worth considering if you want permanent coverage, investment options and flexibility, and you're comfortable taking on market risk.

Before choosing this type of policy, consider your:

Risk tolerance
Coverage goals
Budget
Long-term financial plans

If you want a policy with investment potential and more control over cash value, universal variable life insurance may fit your needs. If you want simpler, more predictable coverage instead, term life insurance or whole life insurance may be a better option.

Variable universal life insurance vs. whole life insurance vs. term life insurance

Variable universal life insurance is only one type of policy you can choose from. At Aflac, we don't offer variable universal life insurance, but we do offer whole and term life insurance policies.

Comparing these options can help you understand which one best fits your goals, budget and risk tolerance.

Variable universal life insurance offers permanent coverage, flexible premiums, adjustable death benefits and market-based investment options. If you want greater growth potential and can handle market risk, variable universal life insurance may be worth exploring.
Whole life insurance offers lifelong coverage as long as your premiums are paid. It also includes a cash value component that grows in a more predictable way, making it generally simpler and less risky than variable universal life insurance. If you want more predictable permanent coverage, whole life insurance may be a better fit.
Term life insurance provides coverage for a specific period, such as 10, 20 or 30 years. It may be a good option if you want coverage for a set stage of life, such as while raising children, paying off a mortgage or managing other major financial responsibilities. If you only need coverage for a set number of years, term life insurance may better suit your needs.

Get a quote for Aflac life insurance today

Variable universal life insurance is a permanent policy that offers flexibility, investment potential and risk. While Aflac doesn't offer variable universal life insurance, we do offer term and whole life insurance policies for individuals and families. Our life insurance policies are portable and offer reasonable premiums.

Chat with an Aflac agent today to learn more about your life insurance options and get a quote.

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