Understanding Variable Unit-Linked (VUL) Life Insurance

A VUL is a life insurance with investment component in it. It allows an individual to have a portion of his income allocated for investments through various funds of his choice, while being insured and protected in life’s contingencies: critical illness, accident, disability and death.

There are 3 types of savings plan you can choose from depending on your need:

  • Regular or Lifetime Saving Plan
  • Limited or Term Saving Plan
  • Single Pay Plan

Regular or Lifetime Saving Plan

This savings plan provides the least possible cost but the plan must be continued regularly or until the insured dies. It is important that you understand that if your insurance agent gives you this basic plan, you will pay your premium continuously, otherwise the plan will lapse or discontinued if the fund value becomes inadequate to fund itself.

For example, you are 25 years old today, you’ll pay P750/month as long as you are alive and kicking. Let’s say you lived the average Filipino’s life expectancy of 70 years. Your savings is P9,000/ year or P630,000 when you reach 70 years old.. Be sure to ask your financial adviser before you purchase the plan being offered to you.

Limited Saving

Limited saving plan provides enough coverage  or protection by saving for a limited time like 5, 7, 10, or 15 years.

However, since the saving period is limited, the premium is a little higher than the premium of Regular Saving plans. The benefits of limited saving plans could be lower than regular saving plans except if with plans where you can get high guaranteed coverage for limited saving because coverage is flexible.

For example, you save P2,000 a month for 10 years that is a total savings of P240,000. But you’ll get a P1 million or P3 million coverage until your 99th birthday. If you add P500 to that amount, you can add other benefits for accidental death, critical or dread disease, and/or hospitalization.

Personally, all my VUL plans belong to this group.

Single Pay

Single Pay plans are one-time payment plans that gives 125% minimum coverage protection. It provides 125% guaranteed insurance protection regardless if the investment component or fund value becomes lower due to market fluctuations. However, if the fund value is higher than the 125% minimum death benefit, the fund value will be given instead.

How Will Age Affect My VUL plan?

Age affects the life insurance rates of an individual. This is because as we grow old, our risk to death are greater than when we are young. Our health may start failing by this age due to stress, pollution and fatigue.

The older we get, the more costly life insurance becomes. It doesn’t, however, increases the premium, but only the insurance charge. In effect, the fund for the investment part is lessen.

Just be warned that some insurance companies charged higher premiums as they increases the insurance charge. So be sure to ask your financial adviser before making the purchase.

For example, you and your friend both purchased the same VUL plan. Your insurance charge is P50/month because you are 24 years old, but she is charged P100/month because she is older than you are. But you both pay the same premium of P3,000/month.

Based on recent competitive studies and research, Insular Life has one of the lowest fees and charges (including insurance charges) on a VUL product.

Did You Know?

How Will My Current Health Affect My VUL Plan?

Our current health conditions also determines our insurability. If we are healthy, then there’s should be no problem. However, if a person had been diagnosed with an illness, that person may or may not be able to be insured depending on the illness.

Rates for those who are not so unhealthy are higher than those who are at the peak of their health. Some benefits may also not be attached if we are unhealthy.

However, those who have critical illness or dread diseases are considered uninsurable. They cannot be insured anymore. This applies to all insurance companies.

This is another reason why it is important to save and start for a VUL policy while we are still young and full of vigor.

Aside from our health status, our family’s health history is also taken into consideration. If parents of the proposed insured have critical illnesses, their children are subject to medical examination, too.

Moreover, persons who have higher body mass index (BMI) had higher risks of health problems than those with normal BMI, thus also required to undergo medical examination, unless the plan being applied for is a Guaranteed Issue Offer.

Benefits of VUL

  • If an insured dies, his/her beneficiaries will get the benefits indicated in his/her plan which are the sum insured or coverage, and the fund value.
  • If an insured is diagnosed with critical illness, he/she can claim hospitalization allowance along with dread disease benefits, or any other benefits indicated in his/her plan.
  • If the insured lived longer, he/she can withdraw funds in his/her plan that is not considered as a loan, compared to traditional life insurance plans. Fund values, however, are not guaranteed.
  • If the insured had an accident, he/she can claim accidental benefits stipulated in the plan.

How To Avail for a VUL?

Consult a licensed Financial Adviser for assistance, and recommendations that suits your needs. They can walk you through the process therefore saving you time and effort.

You may also send us a message at insularlifenaga@gmail.com or pedro.mariaeloisag@inlife.com.ph for free financial planning services.

Published by Meg Pedro

Meg Pedro was born in the Philippines in 1993. She is a financial adviser and loves to share her learning with many. Aside from financial planning, she also loves land use planning in cities and municipalities.

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