Variable Universal Life Insurance

Universal life insurance whose cash value is invested in mutual fund style subaccounts tied to markets.

Overview

Returns are not guaranteed, so cash value and death benefit can rise or fall with market performance, though guaranteed minimum death benefit riders can lock a floor for an added fee. Investment gains inside the policy grow tax deferred and loans against cash value are generally tax free, which drives its use in advanced planning. The combination of insurance charges, investment fees, and mortality risk makes these contracts complex: a market drop can force large premium injections to keep the policy alive. The structure suits buyers with long horizons, high risk tolerance, and a need for permanent coverage, not shoppers seeking cheap protection. Regulators require a prospectus at sale.