What is the difference between variable and variable universal life insurance?

The main differences between variable life and variable universal life insurance are the death benefit, premium payments and cash value account. Variable life has a guaranteed death benefit, fixed premiums and higher cash value growth potential. Universal variable life offers flexible premiums and a changeable death benefit, but slower cash value growth.

Should I get variable or variable universal life insurance?

Whether you should get universal or variable life insurance depends on your life insurance needs and market risk tolerance. Given the potential for policy lapse and negative market performance with variable policies, it’s best to work with a knowledgeable financial advisor or insurance professional or have a healthy knowledge of the market yourself.

Variable Life vs. Variable Universal Life Insurance: Which to Choose?

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.

What Is the Difference Between Variable & Variable Universal Life Insurance?
Should You Get Variable or Variable Universal Life Insurance?
Frequently Asked Questions

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

Variable 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

Variable Universal Life Insurance

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 Coverage	As a permanent life insurance policy, a variable life insurance policy is designed to last your lifetime, as long as premiums are paid.	VUL is a permanent life insurance policy with continuous premium payments required to maintain the death benefit. Changes to the death benefit can affect premiums owed.
Cash Value	This life policy has high earning potential but can also lose cash value depending on market fluctuations in the sub-accounts. Cash value grows tax-deferred, but removing cash can trigger a taxable event.	This variable life insurance policy provides the opportunity to choose your investments, which will affect how fast your cash value grows. The cash value growth is tax-deferred until removed, which could trigger a taxable event.
Death Benefit	The death benefit has a guaranteed minimum amount determined at the start of the policy, which is safe from market fluctuations. You can also choose a face-value death benefit option, which is the face value amount plus cash value or face value amount plus premiums paid. Choosing the latter two may result in a higher premium for the life of the policy.	The death benefit usually does not have a guaranteed minimum; it is flexible throughout the life of the policy. As life situations change insurance coverage needs, you can increase or decrease the death benefit, which will likely affect the premium amount owed. The policy does not have the option to include the cash value or paid premiums in the death benefit.
Premium Payments	Premium payments are fixed from the start of the policy. Failure to make the agreed-upon premium payments could cause the policy to lapse.	Premium payments are flexible and can be adjusted, even when the death benefit is not. This policy has a high chance of lapsing when lowering the premium payments unless the cash account has enough value to offset the lower premium.
Dividend Eligibility	Although this is a permanent policy, it is not eligible for dividends, even when placed with a mutual insurance company that participates in dividend disbursement.	This policy is not eligible for dividends, even when issued by a participating mutual insurance company.
Rider Eligibility	This policy is eligible for riders, such as the accelerated death benefit rider, but rider availability can vary by carrier and policy plan details. Adding riders will likely increase the premium amount.	This policy is eligible for riders, which can vary by carrier and policy plan details. For example, you may want a rider to cover disability, which requires finding a company that offers it with VUL. You should expect to pay more when including a rider.
Use for Estate Planning	Out of the two variable life insurance policies, this policy is more ideal for estate planning, as it has a guaranteed minimum death benefit your beneficiary can depend on.	This policy is not ideal for estate planning as it does not have a guaranteed death benefit. Any death benefit or premium changes could cause the policy to lapse, which would remove its role in estate planning.

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.

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

Mandy Sleight is a licensed insurance agent and has worked in the industry since 2005. She has her property, casualty, life and health licenses. Mandy has worked for well-known insurance companies like State Farm and Nationwide Insurance, and most recently as the Operations Coordinator for a startup employee benefits company.

Mandy earned her Bachelor of Science degree in Business Administration and Management from the University of Baltimore and her Master of Business Administration from Southern New Hampshire University. She uses her vast knowledge of the insurance industry and personal finance combined with her writing background to create easy-to-understand and engaging content to help readers make smarter choices with their budgets and finances.

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