I've been offered a Variable Universal life insurance and i'm not sure if im making the right choice by investing on this. I was told that by 7 years of investing, i can "withdraw" my money back and an additional cash depending on our stock market. I know the risk here is the stock market, but for me, it feels like a too good to be true scenario where i get my life insured while my money "works for me". Can someone explain some good/bad points on VUL?

  • 1
    No. VUL uses mutual funds that are similar to those on the market the only difference being very high fees and surrender values. If you change your mind in the first 5 years or so, you will lose 100% of your investment. Just invest in mutual funds on your own. Lower fees and no surrender value.
    – Pete B.
    Commented Feb 7, 2019 at 14:16
  • Where did the offer come from (ie an employer)? Are you of an income level where you have maxed out 401(k) and IRA? VUL can be great, VUL can be terrible. Your question is akin to 'is it worth it to invest in a mutual fund?'
    – quid
    Commented Feb 8, 2019 at 8:27
  • @quid This would be my first investment. I'm a fresh graduate student. I actually want to be insured while investing and i was told that this is the best offer they can give. It was offered by someone i trust.
    – matt217
    Commented Feb 8, 2019 at 8:32
  • There are situations where whole life makes sense. You probably don't fall in to the category where it would make sense. You would probably be better served by a Roth IRA (you can take your contributions back out of a Roth in the future if need be) at a big broker like Schwab or Vanguard invested in some reasonably conservative funds and if you feel compelled to carry life insurance just buying some level term. Unless there is some underwriting related reason to buy insurance this way it's probably not the best way for you to invest and carry insurance right now.
    – quid
    Commented Feb 8, 2019 at 9:08

2 Answers 2


The basic argument against purchasing life insurance that isn't term insurance is that you are mixing two very different products that don't need to be mixed.

Decide how much life insurance you need. Base this on who needs money if your were to die. Look at their ages, their needs such as college or long term care if any have a disability, and the income you are trying to replace. Purchase term insurance accordingly.

Then decide how much you need to save for retirement. Then put money into a retirement fund such as a 401K or an IRA.

Then decide what other big things you need to save for. The obvious one is a college fund for your children, but there can be other things such as a down payment for a house. Find the appropriate savings vehicle for your goals. It can be a 529 plan for college, and a money market account for a down payment.

VUL tries to combine all of these into one plan. But that doesn't mean that it does any of these things well. Also remember that your needs in each of these categories could change over time, so why would you want to lock these different categories with different timelines into one product.

You will find that the only person who is guaranteed to make money with VUL is the sales person.

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    I really like this answer, thank you so much! But i have one question about your last sentence, how is it that the only person making money is the sales person? Am i not gonna earn money even if its a small amount?
    – matt217
    Commented Feb 8, 2019 at 8:31
  • The key word is "guaranteed" Commented Feb 8, 2019 at 10:57
  • Oh right, sorry for the misunderstanding
    – matt217
    Commented Feb 11, 2019 at 1:01

With whole life insurance, you get either the insurance or the "savings", but NOT BOTH. If you die before you cash out, the savings goes away.

Too many people look at life insurance as either a lottery ticket or an "investment" without considering the costs and knowing that there are other investments that will perform better (unless you die, of course). In reality, you can get BOTH by separating them into distinct products.

Therefore, the way to measure whole life is to compare the additional premium that is charged over an equivalent amount of term insurance. The term to use is dependent on how long someone is dependent on your income to live. Once your kids are grown and you have enough retirement or other savings to live, then your need for life insurance goes away.

So say your whole life costs $200 per month, and they expect the cash value to grow by 3% per year (net of premiums and fees). After 15 years, you'd have a value of about $65K, for a net gain of about $16k. If equivalent term only costs $50 per month, you could invest the other $150 into relatively safe mutual fund that historically return 10% per year, and after 20 years you'd expect to have _over $100,000, with a net gain of $67k! The response I get is usually "but the insurance goes away!". My answer is with whole life, at some point, you'll either die or cash out. If you cash out, the insurance goes away anyways, and you have less to show for it. If you die, the 40K you spent in premiums disappears. You'd be better off either self-insuring with the $100k in your investment account.

I've done this several times, and every time, the return ("cash value") you get for the money you put is horrible. Plus, if you cash out, you lose the insurance. Salesmen push term insurance hard because the commissions are great (which means the margin for the insurance company are huge) and most people aren't informed of the difference between the whole and the sum pf the parts.

The bottom line is that life insurance is not an investment. It is a necessary expense if anyone depends on your income. Combining it with a bad investment vehicle is not a good idea.

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