When comparing universal vs. variable life insurance, the main differences are the death benefit and cash value. Universal variable life offers a flexible death benefit but slower cash value growth, while variable life has a guaranteed death benefit and a greater potential for cash value growth.
Although both life insurance policy types have their uses, and you may be debating between variable life and universal life, both are best for high-income earners with at least some investment knowledge or access to a professional investment manager. They are usually not the most economical choice for many life insurance shoppers.
Table of Contents
Compare Life Insurance Rates
Ensure you are getting the best rate for your insurance. Compare quotes from the top insurance companies.
What Is the Difference Between Variable & Variable Universal Life Insurance?
The difference between variable life and variable universal life insurance is the death benefit options and cash value growth potential. A VUL account gives you the option to increase or decrease the death benefit, while variable life provides the option to increase the premium or cash value of the death benefit. The VUL account can have greater cash value growth but can experience market losses, which may reduce the death benefit.
Variable vs. Variable Universal Life Insurance
- Has a guaranteed minimum death benefit
- Can add cash value or premiums paid to increase the death benefit
- Market losses can lower the death benefit
- Investments can accelerate cash value growth
- Can have higher management fees
- Has fixed premium payments
- No guaranteed death benefit
- Can lower or raise death benefit as life needs change
- Cash value growth is slower and not guaranteed
- May have more manageable fees
- Has adjustable premium payments
Although the names are almost identical and they are both types of permanent life insurance, variable life and VUL insurance are not the same policy. Also, variable life insurance or variable whole life insurance is not a universal life policy — universal life has a guaranteed death benefit, but you can adjust the death benefit and premium payments. While it has greater cash value accumulation potential, it can also lose cash value and lower the death benefit.
Features of Variable Life Insurance vs. Variable Universal Life Insurance
Feature | Variable Life Insurance | Variable Universal Life Insurance |
---|---|---|
Length of | As a permanent life insurance | VUL is a permanent life insurance policy |
Cash Value | This life policy has high earning | This variable life insurance policy |
Death | The death benefit has a guaranteed | The death benefit usually does not have |
Premium | Premium payments are fixed from | Premium payments are flexible and can |
Dividend | Although this is a permanent policy, | This policy is not eligible for dividends, |
Rider | This policy is eligible for riders, such | This policy is eligible for riders, which |
Use for | Out of the two variable life | This policy is not ideal for estate |
Should You Get Variable or Variable Universal Life Insurance?
Are you wondering whether you should get variable life insurance or variable universal life insurance? Both policies are best for investment-savvy, high-income earners with a healthy risk tolerance. Variable life is a great choice if you want a guaranteed minimum death benefit and predictable life insurance premium rates. Variable universal life is ideal for those who want more investment control and the ability to change the premium or death benefit.
Variable life insurance is best for:
- High-income earners with maximized savings options
- People who want death benefit options
- Someone wanting greater cash value growth potential
- People who are okay with market fluctuations that can negatively affect the death benefit and cash value
Variable universal life insurance is best for:
- High-income earners who have already maxed out other savings options
- People who want to choose and closely monitor market conditions
- Someone who wants a flexible premium and death benefit
- People who understand how death benefit and premium changes can cause the policy to lapse
Both variable life insurance and variable universal life are best for high-income earners with a deep knowledge of the market and its volatility or an advisor that can manage the account for them. For the vast majority of insurance shoppers, we recommend term life insurance because it's the cheapest option, and then investing the premium savings separately. Consider these term life insurance companies when researching your coverage options.
If you still believe permanent life insurance is your best option, you should look at our rankings of the top companies for whole life insurance and universal life insurance to help you make your decision.
Compare Life Insurance Rates
Ensure you are getting the best rate for your insurance. Compare quotes from the top insurance companies.
Frequently Asked Questions
We hope this article helps you when considering universal vs. variable life insurance. Here are answers to some of the most common questions about variable life insurance and variable universal life insurance.
About Mandy Sleight, Licensed Insurance Agent
