Variable Universal Life Insurance - VUL

A form of cash-value life insurance that offers both a death benefit and an investment feature. The premium amount for variable universal life insurance (VUL) is flexible and may be changed by the consumer as needed, though these changes can result in a change in the coverage amount. The investment feature usually includes "sub-accounts," which function very similar to mutual funds and can provide exposure to stocks and bonds. This exposure offers the possibility of an increased rate of return over a normal universal life or permanent insurance policy.

While variable universal life insurance offers increased flexibility and growth potential over a traditional cash-value whole life insurance policy, investors should be sure to compare this type of policy against a "buy term and invest the rest" strategy. Particular attention should be paid to the management fees of the variable investment options, as well as to whether or not an individual even needs life insurance coverage beyond a specific point in the future.