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Apr 28, 20236 min

Variable Universal Life Insurance: The Pros and Cons

Variable universal life insurance (VUL) is a type of permanent life insurance policy that provides both a death benefit and an investment component. While VULs are one of the most beneficial life insurance policies on the market today, it’s also important you know that, like most high-yield investments, they also come with risks. Talk to one of our qualified Amplify Agents today to learn if a VUL policy could be the right fit for you. 

Here are some of the pros and cons to consider before purchasing a VUL policy:

Pros of a VUL:

Death benefit

Like all life insurance policies, variable life insurance provides a death benefit that is paid out to your beneficiaries when you pass away. This can help provide financial support for your loved ones after you're gone, covering expenses like funeral costs, mortgage payments, and other bills.

Investment opportunities

Unlike traditional life insurance policies, variable life insurance policies have a cash value component that can be invested in a variety of different investment options, such as stocks, bonds, and mutual funds. This can allow policyholders to potentially earn higher returns on their premiums than they would with other types of life insurance policies.

Tax advantages

The investment gains in a variable life insurance policy are typically tax-deferred, meaning that you won't have to pay taxes on them until you withdraw the funds. Additionally, the death benefit is generally paid out tax-free to your beneficiaries.


Variable life insurance policies are often more flexible than other types of life insurance policies, allowing policyholders to adjust their premiums and death benefits over time as their needs change.

Generational Wealth

Variable life insurance policies can be used as an estate planning tool, allowing policyholders to transfer wealth to their beneficiaries tax-free.

Cons of a VUL:


The investment component of VUL policies also means that there is risk involved. If the investments perform poorly, the cash value of the policy may decrease, and the policyholder may need to pay higher premiums to maintain coverage.

It is true that the investment component of VUL policies does come with risk. However, many VUL policies offer a variety of investment options, which can help mitigate risk by allowing policyholders to diversify their investments. Additionally, VUL policies often include features like guaranteed minimum death benefits or downside protection, which can provide some protection against investment losses.


VUL policies tend to have higher fees than traditional life insurance policies, including administrative fees, mortality and expense charges, and investment management fees.

VUL policies can have higher fees than traditional life insurance policies. However, it's important to consider the overall value of the policy, taking into account the investment component and potential tax benefits. In some cases, the investment returns and tax advantages of a VUL policy may outweigh the fees.


VUL policies are more complex than traditional life insurance policies, and may be more difficult to understand for some policyholders.

While VUL policies are more complex than traditional life insurance policies, they also offer more flexibility and options. Many insurance companies provide educational materials and resources to help policyholders understand their policies, and financial advisors can provide guidance as well.

Surrender charges

If a policyholder decides to surrender their VUL policy early, they may be subject to surrender charges, which can be significant.

It is true that policyholders may be subject to surrender charges if they choose to surrender their VUL policy early. However, surrender charges are often reduced over time and may be waived after a certain number of years. Additionally, surrender charges are not unique to VUL policies and can be found in other types of insurance policies as well.

In short, while there are some potential drawbacks to VUL policies, these can often be mitigated by careful investment selection, consideration of the overall value of the policy, education and guidance, and a long-term perspective. As with any financial decision, it's important to carefully evaluate the costs and benefits and consult with an Amplify Agent before making a decision. Tap the button below to learn more today.

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