The variable universal life (VUL) insurance policy combines many of the features of a whole life policy, a variable life policy and a universal life policy. The primary features are:

• Premium flexibility
• Separate account control
• Assumed rate of interest
• Product is a security
• Death benefit flexibility

Variable universal life is a form of life insurance, a type of cash-value insurance policy.

 Like any life insurance policy, there is a payout in case of death (also called the death benefit).

The insurance policy has a cash value that grows tax-deferred and can be borrowed against.

VUL policies allow the insured to choose how the premiums are invested with the options given in the policy.  This means that the policy’s cash value as well as the death benefit can fluctuate with the performance of the investments that the policy holder chose.

The insurance component obviously provides the death benefit in the early years of the policy if needed.

The investment component serves as “bank” of sorts for the amounts left over after charges are applied against the premium paid, namely charges for mortality (to fund the payouts for those that die with amounts paid beyond the cash values), administrative fees.

Monies can be borrowed against the cash value build-up inside the policy.  Because monies borrowed from a VUL policy that is maintained through the insured’s life are technically borrowed against the death benefit, they work out tax free. This means a VUL owner can borrow money during retirement against the cash value of the policy and never pay tax on that money.

Contact Kensington Financial Services, Inc. for more information.