My Reasons Why You Should (NOT) Get A VUL or Whole Life Insurance

Posted by Fitz Villafuerte under Personal Finance on April 4, 2013

In my previous Reader Mail post, I posted and answered the question:

Is insurance an investment?

I said that it is not an investment, but just a form of protection.

I also said that getting term-life insurance and short-term health insurance is important. In fact, you should have them before you even think of investing.

As a final point to my answer, I said that buying insurance with an investment component such as VUL’s and whole life insurance is a “second-tier investment” and the only reasons why you should buy them are:

  1. You’re “too lazy” to look for better investments.
  2. You already have funds and stock investments.
  3. You want to help a friend who’s selling you that type of insurance.

Yesterday, a reader left a comment in that post saying that he found my reasons “OUTRIGHT OFFENSIVE” – and for that, I’d like to apologize for hurting his feelings, and hope that we can just agree to disagree on this topic.

In any case, I’d like to further explain those reasons, as I think it’s important for everyone to understand why I said those statements.

On Being Lazy
Buying term insurance and investing the difference requires effort on your part to look for investments that will help you achieve your financial goals.

This means studying how UITF’s, mutual funds, the stock market and other securities work and make money. It will also require having the discipline to actually invest regularly and resist the temptation to spend your money instead.

If you’re “too lazy” to do all those, and you’re okay with getting the stated guaranteed cash value and possible dividends from whole life, or believe that the fund value of the VUL will perform at par or better than mutual funds – then go ahead and get them.

Note: Thanks to Ron for the added info in the comments section.

To be fair, insurance companies nowadays are coming up with better insurance + investment packages, with more options and more flexible terms. But as of the moment, if it were me, I’d rather invest it in an equity fund that could give an annual compounded return of 20% – refer to question 10 of the link provided.

Furthermore, it seems that Salve Duplito shares my views on this:

On Being a Second-Tier Investment
I’m a big fan of diversification when it comes to investments.

So if you already have the “best” ones such as investment funds and stocks, and you’re looking for a “paper investment” to add to your portfolio – then graduating your term-life insurance into a whole-life insurance is an option.

Personally, I’d rather buy more stocks or invest in a new fund with that money and just renew the term policy until the time comes that I don’t need it anymore.

Here’s Dave Ramsey explaining why you don’t need to be insured your whole life:

On Helping a Friend
Insurance agents earn on commission, and since a whole life insurance costs so much more than term life insurance, they’ll get more money from the sale. So if you want to help an insurance agent / friend make more money, then buy a VUL from him or her.

Unfortunately, Suze Orman thinks that your friend may not be your friend at all. Personally, I think that the friend is just “misinformed”, and I’m sure he or she has good intentions for selling whole life insurance.

So I hope Vic now understands why I said those reasons. And wish that we could just agree to disagree on this one.

Having a life insurance is important, but just like any product out there, not all types are good choices. I’m a big believer in term-life insurance, and I hope this post has helped you understand why.

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33 Responses to “My Reasons Why You Should (NOT) Get A VUL or Whole Life Insurance”

  1. says:

    thank u for sharing ur insights about insurance, so far which ones are reliable after all the crises faced by our local insurance industry?

  2. Ron Magsalin says:

    I agree on being lazy, 2nd tier investment, and helping a friend. I do have clients like that. But i would like to clarify that VUL doesn’t have cash value and dividends. VUL has Fund Value just like mutual funds wherein the clients can withdraw (partial or full) or even switch funds if they want to. The fund value is based on the performance of the funds that they chose for their VUL plan. It may be peso bonds, balanced funds, or equity. Since these are investment funds, Fund values are not guaranteed so we cannot assume what the returns will be. It can be less than 5% or even more than 35%. Unlike Traditional whole life insurance, the cash values are guaranteed though the dividends depends on how the life insurance company is doing.

    The advantage of having a VUL is that when the insured dies, the insurance part and investments (FUND VALUE) will be given to the beneficiaries with less hassle than plain investments like stocks, bonds, mutual funds, UITF, etc. And if the beneficiaries are irrevocable, the benefits are tax exempted.

  3. Dr. J says:

    Great videos! Very persuasive arguments. Humorous (especially Dave and Suze) but very true. I like the way Dave describes in graphic detail the ideal life situation in the future where you really don’t need life insurance anymore because the kids are already independent, the mortgage is paid off, and you have substantial investments set aside.

    Suze’s life insurance background and revelation really explained to me why I get this impression that the big insurance companies and their sales people seem very well-off financially. I guess they have successfully convinced so many people to get whole life, VULs and similar products.

    I hope many people read this article and take the time watch and LISTEN to the videos. Very helpful to people who are about to decide on whether to get whole life and VULs. Keep it up Fitz!

  4. frugalexpat says:

    Hi Fitz,

    I totally agree with you.

    That’s why now we(hubby & I) have our term insurance and the rest of the funds are allocated to investments.

    Thanks again for sharing your insights.


  5. Fitz says:

    Hi Ron, thank you very much for the clarification. I’ve edited the post to correct the information given.

  6. Blackeyes says:

    Hi fitz,

    thanks for always keeping us informed. great job.
    i don’t have insurance and one time i saw this:

    from bpi. since i already have an account with them, ive decided to have it.
    what do you think?

    thank you so much… :)

  7. Richel says:

    Hello po,

    I’ve been a subscriber of your blog for sometime already and this would be my first time to comment. Not sure why. Maybe because I have time? Haha!

    Anyway, am I correct in my understanding that the money you pay for a term life insurance will not be given back to you in the case that you are still alive and kicking when the coverage ends? I’m planning to get a life insurance policy for income protection purposes but at the same time I want it to become a retirement fund soon once I no longer need it. Ayaw q din naman po kasing mapunta sa wala yung perang binabayad q kahit na nga ba it isn’t too much.

    Thanks in advance for the enlightment. :)


  8. Richel says:


  9. Ron Magsalin says:

    Hi Fitz!

    I really enjoy reading your blogs and I have learned a lot.

    I used to work abroad and didn’t know much about finances. I just started learning few months ago and your blogs are very informative.

    I have started investing with BDO UITF and now I’m attending seminars at COL all thanks to you. A lot my friends are too lazy to exert effort to learn more about finances but when i get the chance to talk to them, i share the things i’ve learned from your blogs.

    Keep it up!



  10. Well said Fitz, I believe that everyone should study first before going to VUL or Term Life.

    I have friends who have VUL but they don’t know what is it all about. When, I asked them about their policy, they have this mind setting that there is no risk at all on what they have. They told me that they will get dividends and sure interest later on. They don’t know that there is still risk with that investment.

  11. Fitz says:


    BPI Save Up is a good start. The free accident and life insurance is just a bonus.

    The coverage is dependent on how much you have in your account (up to P2m) – that may not be enough but it’s okay if you’re not a breadwinner.

    If you are a breadwinner, then use your BPI Save Up to “save up” for a term-life insurance with adequate coverage.


    Yes, term-life insurance payments will not be given back to you – it’s an expense (an important one nonetheless). The cost of term life insurance is very small anyway, so don’t feel bad about not being able to “get it back”.

    However, as an alternative, you can look for a term-life insurance which you can convert into a whole-life insurance at end of term. There are packages like that out there.

    Hope I was able to help.


    Thank you also for supporting my blog, and helping me share the knowledge to others. Hopefully, your friends will soon realize the importance of what we are doing.

    Cheers to our wealth! :D

  12. Carlos says:

    Hi Fitz!

    Excellent points. My personal opinion is that, in the big picture, a VUL benefits the agent more than the recipient.

    It just sounds great upon first hearing, but if we analyzing the costs, other viable alternatives, and missed opportunities, I have no problem saying VUL is not a good investment.

  13. Look says:

    Someone from Chinabank offered me VUL and the poster above is right it doesnt carry cash value and dividend payments. Good thing I know a little about investment products

  14. Richel says:

    Hello Fitz,

    Thanks for the confirmation. And yes, you were able to help. Thank you for a very great, informative post you have here. :)


  15. newbie says:

    Hi sir fitz,
    Whats your take on Philam Life’s Money Tree product? I already have a fami mutual fund, bdo uitf and citisec account.. do you think the money tree is a good additional investment oroduct for me in addition to those i already have? Thank you!

  16. Blackeyes says:

    thanks a lot fitz…more power to you..Cheers! ;)

  17. Desertman says:


    I’ve seen the money tree product a few months ago and my father in law got attracted to it instantly because of their 8% annual fund performance. If I’m not mistaken, it’s like a variable life insurance. But sadly, it did not attract me at all on these three simple reasons.

    1. It’s 8% fund performance is too low. Put your money wisely in stocks or UITF and it could earn around 14 or 16% at least.

    2. Let’s say you get it for P50,000 per year. The agent will get a commission on your whole P50,000 which makes it quite expensive. Just get a term insurance for about P12,000 and invest your P38,000 for a much bigger investment return and with lesser commission charges.

    3. The fine prints says that their 8% is based on historical fund performance and not a guaranteed return. But the market for the past 3 years in on a bull run, meaning the return is really quite good, much better than the 8% they are advertising, so better do it yourself instead of getting someone else do it for you.

    Hope you can visit my site too for some investment motivation.

    Just my two cents.

  18. Yeah I agree with your reasons too, sir Fitz.

    I am also a term-insurance believer.

    I pay for the insurance yearly and then I invest the remaining investable portion of my income myself.

    That way, I learn more and I have full control of my investments and investment decisions.

    Thanks for this and I hope more people can see the advantages of term life insurance :)

    BTW, I don’t sell insurance hehe

  19. Lois says:


    I’m a big fan of Suze Orman! glad to see her name here! ;)

  20. Dman says:

    Hi Fitz,

    I am currently in a VUL since Dec 2012, which triggered my interest Financial Freedom and investments. Anyhow, reading this article and going around I am sorely tempted terminate my contract and go into investing by myself and do Term Insurance.

    This would of course make me forfeit my premiums. Do you think its a good idea to jump off or just keep the VUL?


  21. cinta says:

    Good day! It is okay the prize P 2,500 for 1m Insurance, payable for 15 to 20 years? Thank u :)

  22. Peach says:

    Hi Fitz!

    I happened to attend your seminar last June 21. Whole life insurance is a TRADITIONAL insurance. Being that, people nowadays find ways to make most of their money. You compare term with a traditional which could lapse if you dont pay and more like an expense since it doesnt earn interest except if it is a participating policy which gives dividends. In VUL, it doesnt lapse if you already have a fund value. It has options whether to continuously SAVE or opt to a limited paying period. If you will deduct the cost of insurance charges and the difference of it being invested to market plus the expertise of its fund managers, I believe VUL is a recommendable type of investment. Plus it will not be a part of the estate if it is irrevocable. For Term insurance, what if the breadwinner has minor kids and or the spouse has no competent capability to provide for the family and the health of the breadwinner is compromised that he can no longer be insured by term, all the savings and investments will surely deplete soon. VUL has a lot more to offer and is a very flexible plan and very liquid. And yes it is offensive to make it appear like buying VUL is just “to help a friend selling one”.

  23. chris says:

    I am already intersted with the BPI save up plus insurance but when i read the general provision of the insurance,, it says like this:

    9. EXCEPTIONS. The following exclusions and restrictions on coverage shall apply:
    a. Deaths due to pre-existing and critical illnesses or conditions, whether such illness or condition is known or not to the Insured Individual at the time of account opening, occurring within one year from the date the insurance takes effect, are not covered.
    b. Deaths occurring in restricted areas including but not limited to, Iraq, Iran and Lebanon are not covered.
    c. Deaths due to suicide occurring on the first year, except as provided for by law
    d. For the Accidental Death and Dismemberment coverage, no benefit shall be payable if the Insured Individual’s death or dismemberment shall result, either directly or indirectly, from any of the following causes:
    i. Self-destruction or self-inflicted injuries whether the insured individual be sane or insane at the time of commission.
    ii. Bodily or mental infirmity or disease of any kind.
    iii. Poisoning or infection, other than infections occurring simultaneously with or in consequence of a cut or wound sustained in an accident.
    iv. Any injury suffered (a) while on police duty in any military, naval or police organization (b) in any riot, civil commotion, insurrection or war or any act incident thereto; (c) while traveling as a fare-paying passenger or otherwise in any form of air or submarine transportation, or while engaging in aeronautics or submarine operations, except while the insured individual is a passenger in an aircraft operated by a passenger airline on a scheduled passenger trip over its established passenger route; (d) while or because the insured individual is affected by alcohol or any drug; or (e) in any violation of the law by the insured individual or assault provoked by the insured individual.
    v. Atomic fission or radioactive gas.
    vi. Death or bodily injury or loss occurring one hundred eighty days after the date of the accident causing the loss.

    Especially number “iv.”.
    Based on my own understanding,does it mean the insurance is gone when you die from those causes?

    If it is? Then I lost my reason for getting an insurance..

    Happy to read your reply soon Sir Fitz!thanks in advance.

  24. dennis says:

    Hi Fitz,

    can u advice on what should i do if i already have a VUL and i really dont know how termed life insurance works. i dont know if i can pay a term life insurance on the spot. what i do with my VUL is i saved every month and paid it every quarter amounting to 7500 pesos. i like the idea that i get here, so please advise. i need to be enlighten on how can i escaped this VUL or if theres a way to quit.

  25. carlo says:

    I highly believe that a VUL is a good investment simply because you are hitting two birds with one stone, three even depending on the company where you bought your VUL. My current VUL with sunlife covers life,hospitalization and critical illness. Plus a portion of my money is invested in the fund of my choice. I can even pay more than my annual premium (it is actually encouraged) because the excess money will be invested in the fund of my choice. I see VULs as a “forced” savings and protection plan. If u dont pay your premium chances are your plan will be cancelled. At least when u pay annually you know that you are actually investing as well…
    Not everyone has the time and motivation to go to banks and or other financial institutions to invest and monitor their investments. VULs are good investment channels for busy netizens. If someone is invested then i believe that they do not deserve to be called lazy, regardless of their investment…

  26. Fitz says:


    Ask your agent if it’s possible to convert your policy to a term insurance.

    If you cannot, and if you can honestly and confidently afford the premiums, then just continue with it.

    If you cannot afford the payments, then study your cashflow and find a way to afford it by decreasing your expenses and increasing your income.

    Canceling the policy is your very last option and only if continuing it will severely affect your present finances.

  27. Fitz says:

    My term insurance is renewable until age of 70, has terminal illness benefits and accidental death, dismemberment and disability benefits (ADDD).

    From the same insurance company, I am directly invested in their mutual funds. So there’s really no extra time and effort spent on investing because I pay my premiums along with my investment top-ups.

    My insurance agent, who is also my investment solicitor, updates me with the performance of my mutual fund, apart from me getting quarterly reports via mail on the fund’s performance.

    If you have time to pay your insurance premiums, then you have time to invest. If you have time to watch television or read the newspaper, then you have time to monitor the status of your investments.

    VULs are for people who are too lazy to learn about their better options.

  28. dens says:

    Fritz, what is your insurance firm? I looked online and I only get termed life insurance for 5 year term only. Thanks.

  29. Beth says:

    Thanks Sir Fritz for this blog. This gave me a better understanding on what insurance shall I take.

    By the way may I know what is your insurance company? thanks again

  30. Alvin says:

    Hi Sir Fritz,

    I’m into the 2nd year of a VUL from PRU Life UK.
    Paying 25% of my monthly inflow into it.
    I read the contract and it has all these fees with a maximum charge.
    I’m afraid the company will raise it in the future that will diminish my investment and trapping me.
    Is it wise to terminate it?


  31. Fitz says:

    @dens and Beth
    My insurance is PhilAm Life, but it’s not a product that’s available to the public, it’s exclusive for members of International Marketing Group Wealth Academy.

    If you can afford to pay it, I suggest you just continue rather than putting all the money you have already paid to waste. It’s recommended that you talk to your agent and air your concerns so he or she can give you all your options.

    If you’re not satisfied with your agent’s response, then you can always ask for and talk to his or her supervisor.

  32. Diwata Luna says:

    Thanks for the post. A friend of a colleague is selling me a VUL. I’m doing my research as well as computations and projections. What I don’t like with their VUL is that on your first few years, only a little of your money goes to the fund. Therefore, even if the investment is long term, only a little amount earns more over time.

  33. Jhez bagaslao says:

    I have read your post and somehow agree and disagree at the same time. You only have highlighted the disadvantage of getting a VUL implying a bias perception to the readers. I agree that you may be are too lazy to look for better investment and that the person offering you is a friend are common reasons why we get a VUL. But there are also a lot of advantages of VUL over other forms of investments (like Mutual Funds, Trusts Funds and even directly trading stocks). A VUL is an investment and a protection rolled into one. A portion of your money put in it goes to premium charges (insurance protection) and a portion is being invested to either bonds, equity or both. The advantages? With VUL your investment is being managed by professional fund managers, expert enough to make your money work for you. And knowing that, it can give you that emotional security that your investment will give you the best return given the different financial market circumstances. Say you have invested in a Mutual fund, the market collapsed and your investment suffered a huge loss and you died of Heart attack. Your heir will inherit your losing fund value. But if you have put in VUL, your heir is guaranteed of a specific amount always higher than what you put up.

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