When shopping around for a life insurance policy, Ann wanted both the flexibility of the universal life insurance and the investment aspects of variable life insurance; she found perfect compromise in the form of a variable universal life insurance policy.
Variable universal life insurance
Definition
A form of whole life insurance that combines aspects of universal life insurance and variable life insurance and provides for a death benefit and accrues cash value on a tax-deferred basis. Variable universal life insurance ("VUL") policies allow for flexibility in premiums, death benefits, and investment options. The insured may also borrow against the cash value of the account. Variable universal life insurance is similar to variable life insurance in two aspects: (1) the policies are securities and are subject to federal securities laws as well as state regulation, and (2) the policies carry the same investment risks as variable life insurance, and the cash value of the investment account is dependent on the performance of the account. However, many variable universal life insurance policies do not have the minimum death benefit guarantee; instead, many insurers offer minimum guaranteed death benefits for an additional fee.
Illustrative caselaw
See, e.g. Abdnour v. Abdnour, 19 So.3d 357 (Fla. Dist. Ct. App. 2009).
See also
Definition from Nolo’s Plain-English Law Dictionary
A type of whole life insurance that provides greater potential for financial gain -- and brings greater risks. Like universal life insurance, variable universal life insurance offers flexible premiums, payment schedules, and benefits. But variable universal life policies are riskier because the premiums are invested in stocks, rather than more predictable money market accounts and bonds. Also called universal variable life insurance.
Definition provided by Nolo’s Plain-English Law Dictionary.
August 19, 2010, 5:26 pm
“We begin our discussion by noting that the characteristic of variable life insurance (VL) or variable universal life insurance (VUL) that distinguishes it from whole life or universal life is the presence of a separate account within the policy of insurance. This separate account contains investment choices, usually mutual funds, into which the owner of the policy may invest. When a premium is paid into a VUL policy, the insurance company deducts the cost of insurance and certain fees, and the remainder is invested in the funds in the separate account chosen by the owner of the policy. The ramifications of this arrangement are significant in the context of the equitable distribution of a marital estate. Because the separate account of a VUL policy is, in essence, no different than a brokerage account, the considerations involved in attempting to establish the value of the marital portion of the policy are not the same as the considerations relevant to the determination of the cash value of other types of cash value policies, such as whole life. Instead, the value of the separate account of a VUL policy must be derived in the same manner as one would determine the value of securities held in a brokerage account.”
