Based on an article I recently read, one of the reasons why a lot of Filipinos do not have life insurance is because the insured or the person who owns the insurance policy does not get to enjoy the benefits of the insurance. When you think about it, this way of reasoning is a bit off but kind of makes sense since quite obviously that person’s family and loved ones, as the beneficiaries, are the ones who will benefit when the insured dies. Personally, this is also how I perceived life insurance before. In fact when I decided to get my first one back in 2012, my motivation was to make sure that I will not be a burden to my family by leaving them “something” in case my Creator calls me.
However, just like technology, life insurance has also evolved over time to cover a wider spectrum of an individual’s financial needs. Introducing Variable Universal Life plan or simply VUL. A VUL plan basically is a life insurance plan with an investment component. The emergence of the VUL allows for the accumulation of funds through investing, making it possible for the insured now to also have what we call as living benefits. As the name implies, these are benefits that the insured can practically enjoy while he is still alive and kicking, in stark contrast to the death benefit which most are familiar with and which is given to the beneficiaries upon the demise of the insured.
Having a VUL policy gives the insured an opportunity to create more wealth to address future financial needs, such as funds for retirement, college education fund for the children, capital fund to start own business, etc. On the other hand, it also gives peace of mind to the policy owner, knowing that his loved ones are well taken care of whatever things may come.
The following are some of the important benefits that you can expect when you own a VUL plan:
1.) An investment return that can beat inflation
Investopedia defines inflation as the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling. I recall back when I was in grade school, the minimum fare was only 50 centavos. Now if you compare this figure with the current minimum fare of 8 pesos, you could easily see that the value of the Philippine peso have decreased in the last couple of decades or so. Historically, financial experts peg the inflation rate at 5% every year. Investing your money on a VUL plan gives you an opportunity to earn as much as 10% per annum, depending on your risk appetite and the performance of the fund where you put your money into.
2.) The ability to grow funds via Top-Up
One very important feature of the VUL plan that can truly be a boon when it comes to further growing the funds is the provision for the Top-Up. Simply put, this means that the policy owner, once able to pay the annual premium stipulated in the plan, have the option to invest more funds which directly goes to the investment portion of the VUL plan. Doing this on a regular basis can help maximize the opportunity for growth via the power of the compound interest. For more information on compound interest and how it works, you can check out my previous blog entitled The Advantages of Investing Early.
3.) Fund managers to expertly manage your funds
We would certainly love it that someone with an in-depth knowledge of the stock market and an unparalleled experience in the life insurance industry handles our funds, don’t we? Fund managers basically are a group of people whose expertise is to look for the best investment opportunities out there that can yield high returns of investment for us. Fund managers literally do their stuff 24/7, making sure we do not miss out on those great opportunities.
4.) Life insurance coverage up to Age 88
Whenever my presentation touches on this matter while I am in front of my clients, I always begin by asking “Is it OK with you if we insure you until you’re age 75?” Most of them would respond that it is just fine because they do not really see themselves living beyond that age. I would then playfully tell them that they are actually insured until age 88. This would elicit a hearty laugh from the clients most of the time.
The VUL is primarily a life insurance plan and the coverage it gives ensure that both you and your loved ones are protected from life’s uncertainties.
5.) Loyalty Bonus
One other feature that serves as an add-on to the VUL plan is the loyalty bonus. Leaving your money invested for a specified number of years will generate a corresponding bonus that will be added on to your total fund value. This serves as a reward to loyal policy holders for their trust in the company.
6.) Leaving a Legacy that can span several generations
At the end of it all, it should be our heart’s desire to leave a legacy to our loved ones, most especially to our children. Life insurance is an effective tool in making sure that our next generations will continue to reap the fruits of our hard work.