Posted by Introduction to VUL Insurance
VUL Insurance,Called in English Variable Universal Life Insurance, the full Chinese name isInvestment Universal Life Insurance.
VUL Insurance, also translated in the Chinese world as"fund insurance", "variable/variable insurance", "investment-based insurance", "investment-linked insurance", or "investment-linked insurance".
The world's first VUL insurance appeared in 1986.In the economic cycle of continuous improvement in market conditions and high inflation, VUL Insurance is favored by policyholders and investors.
According to TheLifeTank©️(American Life Insurance Guide) for release in late 2021Data report.VUL Insurance has a 13% industry market share in the United States.
(>>>Related reading:Data｜Increased by 104%, VUL Insurance in the United States has become a big winner in anti-inflation ）
What is VUL Insurance?
VUL insurance (Variable Universal Life) is a contract document signed by the policyholder (ie the investor) and the insurance company.
After signing the application documents, the policyholder opens an account with the insurance company.At the same time, the insurance company also provides a death benefit, paid to the family, or named beneficiary.
The amount in a VUL insurance account is called the "cash value".how much cash is in the account,It mainly depends on three factors: how much premium is deposited, annual cost and annual return on investment.
VULHow does insurance work?
VUL insurance, that is, investment-type universal life insurance, isUniversal insuranceAn evolutionary derivative product of the universal insurance, which inherits the characteristics of "flexible delivery insurance" of universal insurance.
VUL insurance is a life insurance, and like other life insurance, it provides a basic death claim function.
After opening a VUL insurance account, we got the included"Death Claim"和"Cash Value Investing"The function of two parts.
How VUL Insurance Works:The policyholder needs to deposit the premium into the VUL insurance account.After deducting costs, the excess premiums in the policy account go into the investment options built into the account—usuallystock funds, bond funds, or currency funds, for investment and financial management.
These investment options directly participate in the securities market, and investing in the market may bring losses as well as considerable returns.
VUL insurance accounts also usually offer a fixed-rate time deposit option. If you choose to put cash value funds into this investment option, the insurance company will provide a guaranteed rate of return each year. (eg 3%)
A Few VUL Insurance Products Begin to Offer As Market Competition Intensifiesindex fund, fund of fundsof and moreAdditional Insurance Coverage Features (Additional Long Term Care Coverage, Additional Chronic Illness Coverage, etc.), you can send yourLife Insurance Financial AdvisorAsk to learn more.
Examples of VUL Insurance Investment Functions
我们申请开设了一份VUL保险账户，一次性存入了$10万美金。我们选择50%的资金（$5万）去投资债券基金，另外50%的资金（$5万）去投资股票基金。
A year later, the stock fund was up 10% and the bond fund was up 5%.
At this point, we have a cash value of $107,500 in our VUL insurance account, before deducting costs, for an annual benefit of $7.
$50,000 x 10% + $50,000 x 5% = $7,500
Is VUL Insurance Worth Buying?VUL insuranceThe advantages
"Personal protection + income potential + tax benefits", is the core advantage of VUL insurance favored by policyholders:
1. Provide life insurance claims – In the unfortunate event of death, our family members, or designated beneficiaries, will receive a death benefit.This money is often much higher than the premiums we pay.
2. Higher earning potential – The cash value of the VUL insurance account directly participates in the market, noYield cap rate(Cap) limits.In addition to enjoying unlimited appreciation potential, VUL insurance accounts can also enjoy fund dividends (Dividends), often considered a type of life insurance that hedges against inflation.
3. Investment enjoys delayed taxation – Delayed tax payment, known in English asTax-Deferred,This is a tax incentive. Investment income (capital gains) in the VUL insurance account is not subject to corresponding taxes.At the same time, there is no need to pay taxes for transactions in the VUL insurance account.You will not receive tax bills during the tax season every year, which is the biggest advantage compared with the insured's own financial management.
4. No income and capital limit – Unlike IRA or 401K accounts with the same tax benefits, VUL insurance accounts do not have an income limit for opening an account, nor are they subject to annual funding limits of $5,000/6,000 and $20,500/$27,000.Policyholders can deposit any amount of funds at one time.
VUL insuranceShortcomings
Criticisms and discussions about the shortcomings of VUL insurance are generally considered to be as follows:
1. The policyholder bears market risk – Through the choice of investing in the sub-account fund, the policyholder directly participates in the market, and the income is directly linked to the rise and fall of the market. "Risk" and "uncertainty" are factors that policyholders need to manage.
2. Relatively higher cost – VUL insurance is more like an active fund management insurance, so its charges may be higher than traditional universal insurance andIUL insurancehigher.
3. Some VUL policy accounts have limited options for investment sub-accounts – Some traditional VUL policies, or VUL policies issued by traditional protection-type life insurance companies, tend to have relatively simple functions and provide limited options for investment sub-accounts.
4. VUL insurance is more complicated – Due to the introduction of the concept of investment sub-account options, policyholders face more choices and learning content.The annual investment return analysis and the strategic operation when withdrawing money require the assistance of professional insurance financial advisors with additional licenses.
According to WikiPedia, criticism of VUL's insurance products is more focused on"method of sales"One of the most controversial criticisms is:
- Life Insurance Brokers Use the Highest Demo Predicted Rates to Sell When Selling Policies – Life Insurance uses 8%-12+% Predicted Annualized Yields to show policyholdersInsurance design plan(English name:Illustration), without showing the insured the predicted annualized rate of return under other conditions for the insured to make a decision.
VUL insuredApplicable groups
VUL coverage may be considered if the policyholder meets the following criteria:
- Requires life insurance death benefit coverage
- Insured with certain investment experience
- Prefer active-semi-active investment ideas, and wish to fully participate in and share the stock market's rising and dividend potential
- Accept market uncertainty and the resulting volatility, including the possibility of losing your principal or achieving a return on your investment that is much higher than expected.
In general, VUL insurance (investment insurance) is suitable forRequires life insurance coverageAt the same timeSeeking higher earning potential, and also enjoy tax preferential mid- and long-term wealth management productsGroups. (End of full text)
appendix:
*. "Variable Universal Life Insurance", https://www.investor.gov/introduction-investing/investing-basics/investment-products/insurance-products/variable-annuities
*Disclaimer: *The specific operation and performance of VUL insurance products of different brands are specified by the policies and additional terms of different life insurance brands. This article is for educational purposes only and does not constitute insurance or investment advice.
