Variable Unit-Linked (VUL) insurance is one of the most promoted financial products today—but it’s also one of the most misunderstood.
VULs combine two things: life insurance and investment. “The premium being paid is basically split into two: one part goes to fund administering the life insurance coverage of the client, and the other goes into an investment component,” said Rienzie Biolena, Registered Financial Planner, in an interview with Financial Adviser PH.
This means that while part of your money goes to insurance protection, the rest is invested in mutual fund–like instruments—ranging from conservative money market funds to aggressive equity funds, in peso or even dollar denominations. The goal is that over time, your investment grows and eventually helps pay for your future insurance charges.
But the reality is more complex. According to Biolena, the value of your investment depends on many factors: “premium charge, the nature of the underlying fund, the point of entry in the market, the skill of the fund manager, the market movement, the local market, and even global markets.”
In some cases, your fund value may be lower than expected—or even zero. And if the investment doesn’t perform well, you may need to top up the policy out-of-pocket just to keep it active.
So is VUL worth it? That depends.
“VUL works best for people who have the financial capacity to sustainably pay the premiums,” Biolena explained. On the flip side, he recommends term insurance for those working within a limited budget. “It’s the budget-friendly approach—perhaps a temporary and stop-gap measure for protection.”
At the end of the day, he emphasized one thing: “All financial tools are there to achieve a goal, and that is the client’s goal. Therefore, a financial tool must be used if it would serve the goal.”
In short: before you buy a VUL, make sure it fits your needs—not the other way around.
