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

Updated: November 24, 2017

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

  6. 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. 🙂


  7. 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!



  8. 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.

  9. @Blackeyes

    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! 😀

  10. 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.

  11. 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

  12. Hello Fitz,

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


  13. […] reading finance master blogger Fitz Villafuerte’s post on getting life insurance, I finally decided to do the most dreadful thing I have not yet done in over one year: read the […]

  14. 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!

  15. @newbie

    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.

  16. 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

  17. 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?


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

  19. 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”.

  20. 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.

  21. 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.

  22. 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…

  23. @dennis

    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.

  24. @carlo
    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.

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

  26. 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

  27. 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?


  28. @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.

  29. 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.

  30. […] We are getting a term life insurance. We prefer the one with critical illness benefit, accidental death benefit and total disability benefit, if possible. Now, why term life insurance? Because aside from the fact that it’s cheap, it suits our needs (and future goals). I also agree with some of the reasons mentioned by personal finance advocate Fitz Villafuerte in this post on why you should not get a VUL or whole life insurance. […]

  31. 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.

  32. @Jhez

    Having an investment and protection rolled into one is hardly an advantage. It doesn’t even save you that much time. Get term insurance and invest in the same insurance company’s mutual funds and it’s almost the same process because you’re paying the same company and probably dealing with the same agent. (Philam Life + PAMI, or Sunlife Financial + Sunlife MF, etc.)

    Moreover, the investment part of the VUL is invested in the company’s mutual funds (and nowhere else). So it will be the same as if I invested DIRECTLY into the mutual fund company. The only difference is that, I get to invest more money to the MF earlier (and earn more) because a big portion of the payments in the first few years of VULs just goes to the insurance.

    Lastly, a market collapse that will drag down mutual funds will include the mutual funds of insurance companies. There’s no advantage there – your fund value will also be at a loss. And if you have adequate coverage, your term life insurance will be able to provide the benefits for your loved ones to financially move on without you.

    A P1M VUL can give your loved ones around P2M benefits if you die and the fund is at a loss. But a P1M VUL will have around P30,000 annual premiums.

    Meanwhile, a P2M term insurance will only have P8,000 annual premiums. So the “higher” death benefits is really not an advantage here because you can get that benefit at a cheaper price.

  33. I got my VUL 2 years ago with a premium of 50,000 pesos a year.. And when I got my policy, which I received very late, beyond the cooling off period, I was surprised to see the charges, which the agent didn’t tell/explain to me.Too late for me to cancel it..But just recently I decided to surrender it and hoping that I still get some amount back. Big loss, but I’d rather just invest my money in stock than continuing it…

  34. Hi Sir,

    I need your assistance for generalli philippines life insurance+ savings. I am paying annually 85k pesos . And this month of May 2015 is my second payment. As discussed by sales marketing in Bdo. I would be earning 12,00 pesos annually rather than to put on savings account. However I need to pay this on due time otherwise the policy will be lapsed. I took plan of 300k and the maturity date is 5 years. Since I have also investment in stock market , I’m planning to pull out my money after completed the payment in generalli Philippines instead ,I will put on stock market. Please advice me.

  35. Merz, sorry for answering your comment instead of from the blogger himself.. But I believe it is just as fine because what you got anyway primarily focuses on protection secondary is the investment part. For sure you have discussed about the benefits that goes with it and agreed with it.. And also I hope that you did a Financial Needs Analysis first before you signed up. you see, there are (in my opinion) 3 basic parts in Financial Planning; Foundation (money mgt, debt mgt, emergency fund, protection), Accumulation (investment, education funding, retirment funding), and Distribution (estate planning, etc). It is important that you should discuss about the Foundation part of your financial plan because that is the most basic. If you neglect the protection, whatever you have accumulated will just be consumed to address your emergency needs.. anyway have cancelled it already, hope you will think about it again since all of us are not “supernatural” beings that we can never be stricken by these events.. As they say, nobody plans to fail but some fails to plan.. Hope you consider getting a protection first before going to the Investment stage. Though your agent should be transparent with the charges. Likewise, you should be very wise in choosing an agent and there is nothing wrong in getting a VUL. And being “lazy” is subjective. VALUE is more important anyway than the price. SHALOM.

  36. I just wonder why the title has a (NOT) inside a parenthesis. Why put parenthesis on the NOT?

    Anyway, as the article mentioned – insurance is not an investment, but it is protection. Everyone should get an insurance if you are over 21 and under the age of 65. Please don’t get insurance just because you want to help your friendly agent, but because it is a need (not a want) especially if you have a family.

    VUL is a special product offered by insurance companies that carry with it an investment component. So it is both an insurance and an investment, but each is treated separately. The investment portion, just like any other mutual fund or UITF is invested either in stocks, bonds or both and it is managed by professional fund managers. The performance of these fund managers may be viewed through or in the previous article by the author (A number of these investment managers / mutual fund companies are also insurance companies).

    VUL can be a good alternative for those who lack the technical expertise, information and the time in directly managing their equity investments. It may have its disadvantages and risks (just like in any other options) but its advantages are not too bad if you try to study more about it. People should treat VUL as a long term investment activity (best to keep your investments here for at least 10 years).

    For those reading the article, the better advice should be for you to review your investments carefully before taking the risk, Nothing can be more risky than jumping into something you hardly understand. Knowing the risks and the charges your fund manager / stock broker is charging you is basic information you should know before you make any investment.

    Finally, rest assured that the insurance industry in the Philippines is strong. I have yet to hear about an insurance company that has closed down. (Those that you hear about in the news are NOT insurance companies regulated by the Insurance Commission). For your protection, it would be wise to check first if the insurance company is licensed and regulated by the IC.

  37. Well said peach… Be transparent …what most important is your protected not all will understand how play stocks… I have my VUL it almost double the amount I invest in 5 years time…

  38. I couldn’t help but to comment on this discussion. I got a term insurance with investment before because of what I thought was better. But going back, I should have invested in a VUL product. Why? A 36k annually for a VUL payable for 10 years has a total investment of 360k. For the first 2 years, certain amount of what I’m paying goes to my insurance amounting to 58,680 and 3rd til 10th year 100% of what I paid for goes to my investment. With that 58,680, I am protected until 100 years old, with critical illness coverage, accidental death, medical reimbursements, hospitalization benefits, disabilities and the sum assured if anything happens to me. My total insurance cost vs. my total investment for the VUL product is only 16.3%. For the investment part, I chose to put it in equity and the fund managers invest it in blue chip companies. You can see them on the top list of performing funds and I’m happy about it. Remember the rule to save first once you receive your income? VUL companies do this. They write to you and agents remind you to pay your premiums. For term insurance, yes they do that, but how about mutual funds if you will have them separately? VUL makes clients more disciplined. It’s up to the client whether they take it positively or negatively. As for my term insurance, I got the cheapest that time and it costs me 23K per year payable in 5 years. Total investment? 115k. And it’s a term insurance. I got a mutual fund together with this term insurance but I could not religiously commit to put money in my fund.

    I highly disagree with this statement “You’re “too lazy” to look for better investments”. VUL is Insurance + Mutual Fund. How does one becomes lazy?

    I wouldn’t argue further if traditional life insurance is being compared with term insurance because putting money on a traditional insurance is really not worth it. I hope readers will have a better understanding about VUL. There are several types of VUL products per company and it’s just a matter of choosing what’s best for you and the agent is a big factor. Some people who had a bad experience with VUL products might have an agent who is just after the commission so they offer the wrong product to the person.

    I have nothing against term insurance, it’s just a matter of calculating and researching further on where to invest your hard earned money.

    Happy investing everyone! 🙂

  39. BTID vs VUL is always a divisive topic, even among us Registered Financial Planners.

    There have been many attempts to compare them based on actual figures and both sides have always come up with results that favor their side.

    However, I believe that protection always comes before investing. And getting a term insurance is the cheapest option. I’ve met too many people who had to let their policies lapse because they can’t pay their VULs anymore.

    Also, it’s important to note that insurance companies are dynamic organizations. They used to push for whole life, but now, they’re pushing for VULs.

    But because of the many advantages of doing BTID, most of them are now redesigning their VULs to lessen those advantages – which includes offering term insurance that can be upgraded to VUL before the end of term. Some, have even increased the cost of their term insurance, to lower the gap between their VUL plans.

    So, I will not be surprised if someday, VULs become the better option to plain vanilla term insurance. Or maybe, there will be a new type of insurance that will make VULs obsolete.

    But that’s in the future… for now, I believe BTID is still the better strategy.

    Some people got offended when I said that those who get VULs are lazy. For me, that is the truth based on the numerous observation I’ve made through the years of those who mindlessly bought VULs.

    But what many people failed to recognize is that I’ve written in the post two other reasons why you can get a VUL – and that is to help a friend who needs to reach a sales quota – or, if you’re looking for a second-tier investment for diversification.

    On that third reason… you are definitely not lazy if you already have pooled funds, stocks, real estate investments, etc. However, you’re still looking for a place to invest – and thus, getting a VUL now makes sense.

    Life insurance, whether term or VUL, is simply one of the many tools that a person can use for financial planning. It is not the only solution to the countless life scenarios that may happen.

    Cash deposits, insurance (life, health and non-life), investment funds, stocks, real estate, memorial plans and many others – these are all tools that are available for you.

    Here’s the thing… I’d like to share my own financial strategy with respect to life insurance. So that you may better understand why I am on the side of BTID.

    We can just agree to disagree if you believe otherwise.


    1. Get term life insurance because it’s the most affordable type that can protect your family financially in the short-term. A must for breadwinners who don’t have a good financial foundation, i.e. no savings, no investments.

    2. Now that your family is protected just in case you die to soon, it’s now time to take care of the possibility that you live too long through investing. Invest to create passive income and grow wealth for retirement.

    3. You have entered your wealth accumulation phase. Just renew your term life insurance when it expires during this phase.

    4. After the value of your assets have substantially grown (net worth of more than 2.5 million IMO as based on the current exemptions when it comes to estate taxes), it’s time to upgrade the use of life insurance from simple protection towards its inclusion in your estate planning.

    5. At this phase, term life insurance is still the cheapest option, but VULs can now be included in the consideration because:
    a. You can comfortably afford paying the higher premiums.
    b. You already have a good financial foundation, i.e. you have investments in various instruments (stocks, mutual funds, etc.) and own several high value assets (real estate, etc.)
    c. You’re leaving the wealth accumulation phase, and preparing to enter the wealth distribution phase of one’s financial life.

    6. In case you enter this “transition phase” at a time when you can’t get any type of life insurance anymore because no company wants to insure you; or it has become too expensive to get at your age, then all is not lost when it comes to estate planning because there are still other tools that one can use such as putting up a family corporation, etc.

    To conclude, I believe that life insurance plays a dynamic role in one’s financial life. Its first use is for protection just in case you die too soon – to which term life insurance is the best answer.

    As you go through your wealth stages, life insurance slowly becomes a tool for estate planning, to which VULs (especially Single Pay VULs) become a viable option.

    Plan your life well. As for me, upon reaching the proverbial retirement years, I will slowly liquidate all my assets and enjoy life until all that’s left of it is just enough to pay for my basic living expenses and my funeral.

    In the meantime, everything I know and will learn about financial management, I will make sure to pass on to my children, heirs and loved ones. This is my final goal so that they will have no desire to inherit my money because they have learned how to create their own wealth.

  40. I’m sure Fitz that among your colleagues as Financial Planners, they have their own opinions about BTID or VUL. But it is only from you that I have heard that one of the reason why you will get VUL is because you want to help your insurance agent friend. “Thanks” for that very bold statement. I am sure my wallet is more happy than the families I have hoped to help.

    At one point, I am sure that I have read an article from your blog discussing about VUL and a part of that article you have also discussed about Kaiser. First, I dont see the link between Kaiser and VUL since Kaiser is not regsitered in IC. And if Kaiser is your reference to VUL, I understand all these points absolutely. I just cant find it anymore, maybe you deleted it.

  41. I believe that each person has its own view on things but let me point out what the difference between VUL (whole life) and Term insurance

    Price on premiums

    Term insurance – premium increases over time, usually every 5 years.
    VUL – premiums are diminishing, and on the 6th year and onwards, the insured will only have 5% paid on premium.

    e.g. Mr. X at age 30- insured for 1M with ADB, 1st year premium 23100
    Then on the 6th year up to age 88, premium charge would only be P1155.

    Imagine that with Term insurance, how much does term insurance cost at age 60 and onwards, can someone buy and insurance with 1M coverage for P1155?

  42. I strongly believe that their two points of view on this matter.
    1. Having to Invest
    2. Being insured

    The words used that is saying lazy, is quite offensive if we view it on the part of being insured, because if we try to do all the math of where would a person get the most out if his money in order to be insured since after the 5th year, the insured’s premium charge would only be 5%, I can greatly say that VUL would be good choice.

    On the part of investing, I can say that there are a tons of options on where someone could invest. And on the main point, the main need supplemented by VUL is the protection.

  43. This one can be true but its does not mean you follow his thought. I my self loves the idea of being insured first, than invest into bigger investment opportunity.. I got traditional life insurance policy or whole life plus endowment I also have VUL for investing component (equity & bonds) while maximizing may insurance coverage plus answering the financial needs of my family when I’m no longer around.. now after all this me and my spouse start investing to real estate and setting up traditional business investing in partnership and in other companies with friends and so on… we are also a fan of mutual funds and UITF.

  44. before you right this blog you must really know what is VUL.there two types of VUL,single pay which the insurance is only 125% of the investment,multiple pay is more flexible the minimum insurance x5 of the investment and it can be stretch in higher insurance it depends of clients protection need…

    financial planner/insurance agent

  45. Bakit parang ang mga galit sa article na ito ay puro insurance agents? Meron ba dito na hindi ahente na kumuha ng VUL at masasabi nilang mas maganda yun kesa sa BTID strategy?

  46. I absolutely agree with you. Though VULs do have benefits and ROR, it’s not an investment where money is optimized. If the goal is to optimize money at the highest return that we can get from it, VULs are not the right choice. I’ll say, it still depends on our goals. For average Filipinos with average income, I would not recommend this type of investment.


  47. good for you if you have the time and the knowledge to diversify…but not everyone is like you. Some people are lazy and they just want to invest and not think about other stuff.

    that is what there products are for…its not for everyone. I applaud you for giving insight to these matters….

    personally…If my money earns just 5% im golden. compared to a normal savings account its a total win for me and I dont have to do nothing.

    these products are there to make our lives easier and focus on other things.

    unfortunately comfort comes at a price and obviously the insurance company will take their cut on things. but that is just how it is…its a business and a business has to earn income to continue to do business.

    If you have the time to actually study all those things then fine do what you have to do but if you want the comfort and the idea that these things are being taken care of for you then go for VUL and the likes…

    just my two cents…

  48. Will there ever be a time where you don’t need insurance anymore? Even billions will be subject to estate tax upon death. Pay the amount or pay the smaller obligation?

    I think it is better to understand the purpose of every product. If there are bad products out there for financial industry then it should not be allowed in the market. From banks to insurance to investments. Right product for the right purpose. The only problem are those who sell just for the sake of selling.

    Stocks are not the right product if you are looking for protection, neither are time deposits for long term investments, and insurance if your main purpose is to maximize returns while living.

    We need the right product for the right purpose. To be informed not just sold.

  49. I have a VUL with Philam that has additional RIDER for accidental and medical reimbursement. It was only after two years that I realized this is expensive for a 1.9M coverage apart from the life insurance tied up with investment. Can I request for the rider to be terminated within the holding period of my VUL?

  50. Thanks for the tips Fitz. 🙂

    At first i was interested in Sunlife Flexilink assist VUL with TDB, ADB, CIB and HIB cause it sounds amazing til i got the proposal.

    1million benefit with 10years premium holiday: 21720php
    Total Disability Benefit (Waiver of premium): 2650php
    Accidental Death Benefit (1Million): 1000php
    Hospital Income Benefit (2k/day): 4960php
    Critical illness benefit (500k): 2365php

    Total Initial Annual regular premium: 32695 payable in 31years
    Total Initial Annual Annual Premium: 130780 payable in 10years

    If i manage to pay 130k for 10years, by time i turn 65 I will get:

    4% fund value: 2.6M
    8% fund value: 7.8M
    10% fund value: 13M

    However if I will pay regular premium for the next 31 years, by the time I turn 65 it will be:

    4% fund value; 1M
    8& fund value: 2.2M
    10% fund value: 3.3M

    And just in case I fail to pay the premium by the time I turn 50, the 10% fund value will be around 111k by the time I reach 65.

    With pure term insurance – Sun lifeassure, the proposal is:

    Age 34-39: 10590php
    Age 40-44: 12930php
    Age 45-49: 17640php
    Age 50-54: 23840php
    Age 55-59: 34040php
    Age 60-64: 44580php

    I will probably stop paying by the time I reach 60 cause I expect my beneficiaries to be independent. 🙂

  51. Hi. I am not lazy, in fact I always research about investing and protection. I decided to get two VUL as my retirement purpose, and this is best for single like me, so at least I have an insurance and at the same time for investment. And true, it is a force savings, but it is much better rather than to save in bank. VUL is for long term and this is best for retirement and for educational purposes.

    For me there is nothing wrong to buy VUL, as long as you know your financial goals and the reasons to why you invest.

    Every investment product has its own characteristics. what is really wrong, people don’t know their real financial goals that they end up put money in wrong investment.

    That is why always educate yourself but don’t depend on blog sites. They are just a guidance.

  52. Just realize what will happen to those investments when you are not around..
    Maybe donate it?
    I have both VUL and Mutual Fund..

    I personally think single pay VUL or pure investment only are very good choice when dealing with large sums of money.
    At least you have the protection that MF just can’t provide and the cost of insurance is low.

    People do their own views without knowing the details of each investment around them.

    Each has its own strengths and weaknesses.
    It is better to understand that one type of investment just don’t work with all types of people.

    Imagine if all Filipino will invest in Stocks and saturate the market..

  53. Dami VUL agent n ngcomment. Hehehe. Why you should get VUL if you have SSS, Philhealth. Go directly to investment. =) Tnx for the tips Fitz.

  54. I’m glad that I found this blog… 43, I dont have any insurance yet and I guess I can only afford the TERM Insurance. Thanks for the information.

  55. Hi Sir Fitz,

    I have this VUL from Sunlife that I paid annually for more than 3 years already. I noticed that I pay monthly but I’m not getting gains and honestly parang lugi pa ako.

    My cash fund is only 60k plus for paying 60k every year for 3 years. Should you recommend to withdraw the cash value instead and terminate my policy and get a term instead?

  56. Hi Sir Fitz,

    Thank you for your very informative blog.

    At age 25, I signed on a life insurance policy. Needless to say, I didn’t know that I have to pay for it for my whole life. the endowment with compound interest was the selling point when I signed the policy.

    Today, 10 years after, I decided to surrender it and get its cash value. I wanted to invest the amount that I will get wisely.

    My original plan was to get a VUL (to replace my whole life insurance which I realized was a total rip-off) and invest the rest of the money in various markets (low to high risk). But now, I am starting to doubt whether I should get a VUL or not.

    I don’t have a steady income since I am self-employed. I would really like a sound advise on how to manage the money that I will get as I do not want 10 years of ‘savings’ to go down the drain.

  57. Hi Dhen. 3 years of VUL means you are still paying more on insurance. VUL is insurance + mutual funds; so the cash fund depends on the market performance. It is not a guaranteed amount that you will have by a certain period of time. Have you compared the projected fund written in the proposal with the actual accummulated cash funds?

    If the premium is too much for you, you can downgrade your coverage. Just talk to your agent about it.

  58. What is your advice to those who already got a VUL? Should we stop paying? Or continue paying but just limit the amount for investment portion?

  59. Nakakatuwa yung admin ng FB group Pinoy Insurance Talk – Ron Magsalin. Nung nag try akong i-share itong blog ni Sir Fitz. Blocked ako sa group bigla.

    “Pinoy Insurance Talk – PIT” pa man din ang tawag.

  60. I plan on getting VUL because the annual premium is the same for 10 years. With term, I was thinking I won’t be insurable anymore when I get sick. Mejo high risk because of family history. What’s a better option?

  61. Sir, advisable pa rin po bang kumuha ng term insurance pag may GSIS at SSS na ako? I’m 47 with 2 kids. Kung advisable, saan po naman makakakuha dito sa province ng La Union. Puro VUL ang mga insurance offices dito except BDO with Generali Phils.

  62. Hello Sir Fritz!

    Thanks for sharing your thought. I’m OFW and theres an insurance company here that also offer term insurance. Kumbaga almost same premium pero mas malaki ang covered amount compare sa insurance company dyan sa pinas. Worldwide din ang coverage. Iniisip ko lng pag nag for good nako sa pinas, and just in case something happen to me (knock on wood) di ba mahihirapan pa family ko na i claim yun or maybe need pa nila pumunta ng singapore. So what can you advise po, better po ba jan nlng ako kumuha ng term insurance kesa dito? Thanks po

  63. Hello Sir Fitz,

    I have a VUL at april 2016 ko pa lang nasimulan.. I’m planning na itigil ko na yun kasi nakita ko na mas cheaper and mas malaki ang growth ng pera na hinuhulog ko sa BTID..

    However, nung nalaman ko about estate tax, mukhang mas maganda ang VUL

    my questions are;

    1. meron bang way para maging tax-free sa BTID?
    2. what are the options ng beneficiary to lessen the estate tax?

  64. Magkano kaya ang allocation ng premiums na napupunta sa insurance side at investment side? for the span of say, first 10 years?

  65. Hello Sir,

    I really need your advise because I am in a dilemma of canceling my VUL. Here’s my situation.
    Just realized I am not so educated about what I got into. I have a VUL for since December 2015, P5000 per quarter. P3K+ to insurance and almost P2K to funds..
    I am married with no kids yet, 37 yrs old, private employee. My husband is 44 a govt employee. We have a total combined income of 34K a month. We are also supporting my elderly mom who is already 77, still strong but already taking maintenance meds. One time she was hospitalized.

    That incident made me realized that our savings might be at risk if ever an emergency happens. It already happened to us when my Father was hospitalized and eventually died after 3 months. That was 2 years ago, my hubby and I just replenished our savings which is not even enough for a decent 2nd hand car. So with that, my only option is to cancel my VUL so I could focus on savings and investments..

    When I first applied for VUL, I was only thinking of investment – Mutual fund, not even considering that I need a life insurance. I have already paid 20K for the VUL and due of another 5K this quarter.. My agent advised me to just skip payment so I can reinstate it in the future. If I would surrender the policy, she said I wont be able to get the same life insurance again.

    SO my dilemma is I will be losing money on either cancelling or skipping payment on the policy. But which one is the better option for me? I am really after having an investment for retirement or in case if we will have kids at an older age, we won’t be worrying future funds for them.
    Please help, we don’t earn that much and Im almost 40. We want to save for our future children and yet we want to be able to support my mom’s needs and emergencies.

    THANK YOU SO MUCH! Hope to hear from you soon. God bless you!

  66. Try to explore in IMG and you will be financial educated. more webinars, training, conferences and etch. 🙂

  67. Hello sir, may I ask. I have a Plan which is Sun FlexiLink. I started to avail this last October 29, 2015 and have paid Php 6,000 quarterly. Now my fund value is only Php18,574.68. Is it possible to withdraw this as feel like my money is decreasing and not growing. My plan is to withdraw the remaining fund value and will start to invest to COL Financial. Please advise

    And also my fiance have started to avail this plan last November 2015 and have paid Php4,500.00 quarterly however to our surprise we have found out and to our surprise that she has only Php -344.00 (negavtive fund value when we check her account online website.

    Does she still have a money left in her sunlife to withdraw?

    Hope you can answer all our queries. Thanks much

  68. Hi Fitz,

    We are planning to cancel our VUL policies ng wife ko. We realised na masyadong mahal ang premium. Can you suggest any TERM Insurance na we can avail?


  69. Hi Sir Fitz,

    I’m 27 and I’m planning to get a vul in Sunlife I earn less than 20k a month. Would it be right for me get one or there are other good options you may suggest. Wish to have one because of the thought of the return of investment someday at the same time i know im insured.

    Appreciate your suggestion on this.

    Thank you,

  70. A little knowledge is a dangerous thing is what I thought of after reading this article. If this is so, why would a family friend, who happens to be a fund manager from COL financial, plans to withdraw his investments in stock to invest it in VUL?

    Better to make yourself well-informed on the topics you are posting as this might mislead people 😉

  71. Hi Mj,

    So what is the reason why your family friend, who happens to be a fund manager from COL financial, decided to withdraw his stock investments and invest in a VUL?

    Did he withdraw all his stock investments? Or just a portion of it? Did he get a VUL plan from you?

    I hope you can share it here. I am looking forward to knowing why. Thanks.

  72. Hi Fitz! You may call me as one of those “lazy people” and totally have unknowledgeable when it comes to investing, please help, I am paying 4 vuf and we have 2 mf at sunlife but lately it’s getting difficult to open with the paymentsame as we are paying still for our car, please advice me what to do

  73. Hi Im thinking of getting VUL next month. Im a single mom and breadwinner. I just needed more insights. Thanks.

  74. Hi Sir Fitz! Good day! I was a fresh graduate when I bought a VUL last January 2013, it was offered to me by one of my friends and thinking that it is a good investment, I agreed on the plan that she laid out on me. Last month, I realized that the insurance that was linked to the VUL was a whole life insurance and I have to continuously pay for it, which for my case will be until 2092. My friend told me that I only have to pay for it until 10 years and it will be okay. Now, I am confused and I don’t know if I will still continue to pay for the insurance knowing that it may lapse if I don’t pay for it until I was able to use it. Should I just withdraw the fund and transfer it to other type of insurance or should I just continue to pay for it and withdraw the amount after 10 years? I am already 25 years old, without dependents and is already investing in the stock market.

  75. Hi Bevy,

    You only need to pay for 10 years, then the policy will take care of itself. Since your VUL has investment side, the policy will just get the premium payments needed out of the interest you will earn from your investment and investment itself. In the end you will still get more than what you paid for. I agree that VUL is expensive, but that is because life is not cheap. If you will run the numbers vs Term Insurance, term insurance is way more expensive in the long run, compared to a VUL product. If you are thinking short term, term insurance is the way to go, but if you are thinking risk and long term horizon, you will get more out of VUL than any other investment I know.

  76. I disagree, I think your points are can be considered as a personal opinion. To make it more factual, you should present computation and actual information and not basing only on emotion and opinion.

    You can present computation for investment only and computation for vul ( sun life investment & insurance policy ) and explain the two resulting computation.

  77. Hi Fitz,

    I just want your opinion regarding my Policy. I got my VUL last 2012 and stopped paying for it last 2016. I’m planning to terminate my policy but when I called their hotline to inquire about the requirements the CSr told me na sayang daw kasi ilang years na. I do not know the Agent na kasi she resigned already and it was transferred to someone i didnt know personally. If you were in my place, would you still continue or just withdraw. I’m 36 and not working right now . Pls help me decide. Thank you

  78. Thank you for this post. Even though I’m a Sun Life Financial Advisor, I’m open into learning on which will best cater to the needs of my clients. I’m reading a lot and will definitely research more on regarding this topic. If in the end, BTID is more ideal for most clients, I’m more than willing to recommend such to my prospects and clients. However, after reading all the comments by the respondents and Fitz, I came to realized that there would be still times where in VUL might be more suitable for the specific needs and situation of the client. Lastly, Single Pay VUL is indeed a good form of investment while taking advantage of the protection and tax benefits of an insurance product.

  79. If you have any questions, you may email me at: [email protected] or you may text/call me at: 0917-5662845. Just to share a little background of myself, I currently have one (1) Investment-Oriented VUL Product, one (1) Protection-Oriented VUL Product, and two (2) Certificate of Participation for UITF.

    I made a comparison matrix of popular VUL policies in the market (Sunlife, Axa, Manulife, Insular Life, Bpi-Philam/Philam Life, Prulife). But first….

    Among VUL, mutual funds, UITF, and direct stock trading, only VUL offers simultaneous life protection, growth of money thru investing, and the many supplementary benefits (cash assistance when hospitalized, or upon diagnosis of critical illness, etc.)

    With regards to investment, it would also be prudent for starting investors to enter pooled funds instead of direct stock trading unless he has large capital to invest in blue chip stocks, and has the time and diligence to track market movement from time to time, since one can really maximize earnings by trading.

    With regards fund performance among pooled funds (VUL, mutual funds, and UITF), best fund managers in the country are employed in Life Insurance Companies, which offer VUL products, hence annualized returns are higher in VUL by historical performance. And among several VUL products, there are actually few funds that really stand-out. And these funds are available only in select few Insurance Companies.

    If you are interested in availing VUL policy, I suggest you get as many proposals from different Insurance Companies as possible. DO NOT compare the products by the illustrated projected fund values through the years. As stated, these are PROJECTIONS, and all are mandated by Insurance Commission to show projected earning rates at Low (4%), Medium (8%), and High (10%). Different companies also offer different protection coverage periods. Some guarantees up to 99 or 100 years old, some are only up to 80 to 88 years old, so one may be swayed to get a “less expensive” policy, but this is not actually case and when you do the math, he/she is actually paying more for relatively shorter coverage, and this is not only for the life coverage but includes also for supplementary benefits (critical illness, accidental death benefits, etc.)

    Lastly, keep in mind that when Financial Planners present to you a VUL policy which would require limited-term pay (5-yr/7-yr/10-yr), it is NOT guaranteed that you will only pay up to this period. VUL is investment-linked, and all will depend on the actual fund performance. Same goes with regular pay- it is NOT true also that you will pay continuously, so look for a premium holiday feature (with no premium holiday charges).

    If you are interested to learn more, I was able to make a comparison matrix of all VUL products, and these cover 2-groups – Investment-Oriented and Protection-Oriented Products. I had 19 criterias as basis of for my evaluation when choosing which company gives more value to the premium (investment) that I pay, as one will be suprised that some companies charge more than other companies (and this does not include yet the hidden charges- you will only realize that it is hidden when you understand complex terminologies in the VUL policy).

    Example of my criterias are: fund performance (annualized ROI/assets), market capitalization, pricing policy (single or dual), protection coverages, premium and monthly deduction charges, rules on policy lapsation, effect on short-term non-payments, etc… I also made an analysis about the pros and cons of regular pay and limited-term pay. Actually, a lot of Insurance Agents offer limited-term pay since it requires higher minimum, and with higher premium the more commission.



  80. For reference to fund performance of different investment vehicles (VUL, Mutual Funds, and UITF), you may refer to this link:

    One needs to understand the difference of Annualized and Absolute Return. It would be straightforward to make a comparison of different funds and distinguish which funds are superior or perform better if the inception dates and time duration of subject funds are the same.

    Unfortunately in reality, investment funds have different inception dates. You can actually verify inception dates from Fund Fact Sheets. Interestingly, you will identify in the link I posted earlier that there are actually VUL Funds that perform better than their counterparts, and these VUL Funds are even superior than Mutual and UITF fund counterparts.

    Without knowledge of how investments perform, an investor could be committed to an inferior investment and never even know it. An Annualized Return figures the investment’s average annual return or how much the investment has grown on a yearly basis for a specified period of time, while the Absolute Return measures the overall return for the entire period you’ve held the investment since inception date.

    For example, a 5-Year Annualized Return at Year 2018 will tell you how much return your investment has generated on a yearly basis from Year 2013 up to Year 2018 (5-year duration). On the other hand, an Annualized Return Since Inception will tell you the average annual return of your investment since the inception date, hence if the fund’s inception date is Year 2009, that would be average annual return for nine (9) years. Therefore, Annualized Returns are very useful when you want to compare two different funds or investment vehicles (of the same category) where time duration and/or inception dates are different.

    Each Insurance and Investment Company will show you numbers in the way they look attractive to them to sell it to you. But in my experience, annualized returns (with consideration of Assets Under Management) are the most effective way to calculate the returns and compare fund performance of different Variable Life (VUL)-investment linked products.

    Thank you

  81. I wrote in my previous post that there are VUL Funds offered by select few Insurance Companies that have shown superior fund performance over their Mutual Fund and UITF counterparts. At this point, I would like to explain another important benefit of VUL Product- The Total Disability Waiver.

    1. Note that Variable Life Policies are investment-linked products, which means that so long as the Fund Value/Account Value/Full Withdrawal Value is not zero (0) and is sufficient to cover the monthly deductions, the plan will not terminate, and the insured person is covered with minimum guaranteed benefits. The minimum guaranteed benefits in most VUL Policies are presented in Item Nos. 2/3/4 below. Is it possible to have a Fund Value less than zero (0) or negative during the early years into the policy? The answer is YES and No. If a VUL Product has no Contract Debt Feature, it is possible that Fund Value will become negative in the early years of the policy, and Policy Owner will then be required to make a top-up payment. However, some VUL Products provide Contract Debt Feature, and this will prevent the Fund Value to be negative during the early years of the policy. Therefore, always look for the Contract/Policy Debt Feature in a VUL Product.

    2. What is the 1st minimum guaranteed benefit per Item No.1? This would be the death benefit of the policy. This represents the “Face Amount” or “Benefit Amount” of the policy that will be paid out on a tax-free basis to whoever the Owner and/or Irrevocable Beneficiary of the policy is. This is equal to 500% of the basic monthly premium or the Policy Face Amount whichever is higher.

    3. What is the 2nd minimum guaranteed benefit per Item No. 1? This would be the accidental death benefits. In most VUL Policies, this is a built-in feature in the product already. However, there is one Protection-Oriented VUL Product that I know that offers accidental death benefits as an optional rider only, which means the rider can be detached, and therefore savings on the overall Rider Premium. The Additional Death Benefit provides additional coverage of up to 100% of the Face Amount or Benefit Amount if death is due to accident.

    4. What is the 3rd minimum guaranteed benefit per Item No. 1? This would be the Total Disability Waiver. This is a built-in feature in VUL Policies without charge. This waiver of premium rider pays all Basic (Life insurance and Investment Allocation) and Rider (Supplementary Benefits) Premiums due if the insured person becomes disabled and unable to perform work.

    5. The waiver of premium benefits the less well-off policy owners the most, because they would least be able to cope with paying for all future premiums if they become completely disabled, and this include the premium that is allocated to investment (cash value). This can provide the insured person with potential passive source of income (thru partial withdrawals in the policy) if the insured person becomes injured and/or disabled, hence unable to work or perform the key income producing duties. Passive income comes from earnings that one receives with little or no work required. For this case, passive income would refer to investment earnings.

    6. A Term Life Insurance Policy (referred to as TERM in BTID or “Buy TERM and Invest the Difference”) is a type of insurance plan that offers financial security to the family of the insured upon Insured’s death. When the insured person dies within the period covered, his beneficiaries get paid. If nothing happens to the insured person within the term, he/she does not get anything. While optional riders can be attached to a Term Life Insurance Policy for more comprehensive coverage (similar to VUL riders), it would not still be able to level the coverage of Total Disability Waiver Benefit for VUL Product as premiums do not earn cash value. Note that in a VUL Policy, the waiver of premium includes the amount that is allocated for investment, which cannot be applied in a Term Insurance Policy.

    7. In relation to Item No. 6, this is one of the reasons why VUL Products continues to be more appealing and valuable to people. A total disability or being unable to work due to injury (i.e. when a classical musician permanently injures his arm) will inevitably decrease a person’s income. When insured person becomes disabled, it makes much more difficult for him/her to save money and will impact the retirement plans. With less savings, and less ability to add money to savings, a total disability will have a significant and negative impact on a person’s net worth, which is the amount that he/she is able to save for retirement, and the amount that he/she will be able to pass along to his/her beneficiaries.

    Thank you.

  82. If you have any questions, you may email me at: [email protected] or you may text/call me at: 0917-5662845. Just to share a little background of myself, I currently have one (1) Investment-Oriented VUL Product, one (1) Protection-Oriented VUL Product, and two (2) Certificate of Participation for UITF.

    At this point, I would like to address a popular misconception that a VUL Policy is more expensive, and yet offers inferior benefits on the life insurance and investments of the insured person compared to BTID (Buy Term and Invest the Difference).

    8. In a VUL Policy, every time one pays a premium, a certain percentage of the premium goes toward premium expense charges and the balance goes towards the Cost of Insurance and Cash Value (investment portion). Premium expense charges include administrative fees, commissions, and the life insurance company’s overhead.

    9. In my own opinion, I see nothing wrong with giving sales commissions to Financial Advisers or Insurance Agents, especially if they are really providing holistic and personalized service to their clients. This include regular updates on the fund performance and giving recommendations when to make fund switches or apply changes to the fund allocations in the policy. Note that same with Mutual Funds and UITF, one can really maximize the returns of his/her investments by making strategic fund switches and changes in fund allocations. Oftentimes, the facilities offering Mutual Fund and UITF Products provide only transactional service, which means that after an investor gives his/her investment, Mutual Fund and UITF Brokers/Agents may not bother to do periodic monitoring and reporting of fund performance to the investor.

    10. In relation to No. 9, Financial Advisers or Insurance Agents, at their own expense, had to pass two (2) rigorous licensing exams and register with an official regulating body- in the Philippines it would be the Insurance Commission. Afterwards, they had to do several prospecting, and if successful, set meeting with their prospect Clients. Note that the Insurance Company does not pay its Financial Advisers and Insurance Agents with a daily or monthly allowance. Financial Advisers or Insurance Agents will have to spend their own money for business-related expenses (phone bills when calling the client, transportation expenses when meeting the client, internet usage when drafting and sending product proposals online, miscellaneous expenses such us purchase of coupon bonds and printing of product proposals, etc.), not to mention the challenges they face when chasing tough potential clients.

    11. When one is a VUL Insurance Agent, he/she needs to understand how the VUL system works. I have mentioned in my previous post that VUL Policies are complex insurance products. There are a lot of factors that need to be look at when a prospect client would want to make comparison of various VUL Products offered from different insurance companies (i.e. market capitalization, assets under management, annualized and absolute returns, equities, long-term/shirt-term bond pools, etc.). The responsibility of VUL Insurance Agent is to make the client understand the features of the policy and give reliable recommendations, hence diligent study of finance and wealth management is required for a VUL Insurance Agent.

    A VUL Insurance Agent is no different with Licensed Doctors, Lawyers, or Engineers who charge their clients with consultancy and/or service fee. If we are willing to pay Teachers, PUV Drivers, and several others for the services rendered, I don’t see the point of discriminating VUL Insurance Agents and Financial Planners. I am a Mechanical Engineer by profession, and I don’t see myself providing free consultancy services to my Clients on mechanical design.

    12. The next question would be, are VUL Insurance Agents receiving big commission for every case closed? The answer is NO. The range of sales commission in most VUL Products (Single and Regular Pay) is between 2% to 30% of the annual premium payment for the 1st year, while for the remaining paying period for the premium charges, the range would be somewhere between 2% to 10%. The sales commission is only a part of the premium charges. Therefore, if the annual premium for a VUL Policy is Php 25,000.00, the maximum sales commission during 1st policy year is Php 7,500.00. If you look at the big picture, wherein your investment has the potential to grow 400% after 20 years (at 10% projected earning rate), the Php 7,500.00 sales commission is actually not a big deal anymore.

    13. Note that different Insurance Companies offer different paying period for the premium-charges. Investment-Oriented VUL Policies have less premium charges and shorter paying period on premium charge, compared with those of Protection-Oriented VUL Policies. Note that VUL can be classified as either investment-oriented or protection-oriented. There are insurance companies that may require paying period on the premium-charges up to the maturity of the plan (lifetime), some could compress the paying period between 2-years to 4-years but at relatively higher premium charge rate, while others could present very low premium charge rate on the product proposal but actually have ‘additional monthly deductions’. Regardless of the paying period, it is worth mentioning that payment of premium charges is only temporary (short-term). What most BTID advocates may not be aware of is that there is actually one VUL Product offered by an Insurance Company that charges very minimal premium rate, and that would be 75% of annual premium for the 1st policy year only, which means that from 2nd policy year onwards, 100% of the premium will go toward the cost of insurance and investment (cash value). I can attest to this because this is the current plan that I own.

    14. Another thing that BTID Advocates may not be aware also is that for Pure Investment Vehicles, such as Mutual Fund and UITF, there are also Premium or Administrative Charges, although they are called differently. Example, for a mutual fund there would be Shareholder Fees- these are Sales Charge on Purchases (similar with commission you pay to a broker) and Deferred Sales Charge, Redemption Fees, Exchange Fees, Account Fees, Purchase Fees. There are also Annual Fund Operating Expenses, and these include the Management Fees, Distribution Fees, and other Expenses. And as long as the investment stays in the fund, the payment of Shareholder Fees and Annual Fund Operating Expenses will continue, unlike with most VUL Products where payment period of premium charges is short-term only.

    15. Perhaps one interesting feature of VUL is that it uses a Single-Pricing Method. On the other hand, Pure Investment Vehicles use Dual-Pricing Method. For funds operating a single pricing policy, the Net Asset Value Per Unit (NAVPU) is the same when you buy the fund or sell it. As a result, there will be no additional fund management charges during fund switching and/or changing of investment allocations.

    For funds that implement dual pricing, the price at which you buy the units, is known as the Offer Price, and the price at which you sell the units, is known as the Bid Price. A Bid-Offer Spread is the amount by which the Offer price exceeds the Bid price for an asset in the market. The Bid-Offer Spread is supposed to account for the difference between buying and selling prices that the fund manager pays when buying and selling units in the fund. A Bid-Offer Spread includes profit margin for the fund manager/s, and this is on top of the Shareholder Fees and Fund Operating Expenses. As a result, there will also be additional charges during fund switching and/or changing of investment allocations.

    For investors who put investments in multiple fund allocations and do strategic fund switches from periodically to maximize growth of investment, the single-pricing would be more attractive due to less overall deductions from the Fund Value. Also, most Mutual Funds are close-ended pool fund, compared with VUL and UITF that are open-ended pool funds. With close-ended pool fund, it is more difficult to make fund switches to take advantage of the movement of asset prices resulting from changing financial climate.

    16. What most BTID Advocates may not understand also is that a VUL works similarly as a BTID, except that the former offers more coverage for death benefits and living benefits (thru optional riders as I explained above). Why is this so? The Cost of Insurance (per Item No. 17) in a VUL Policy is the premium that one would pay for the life insurance portion of a Term Life Insurance Policy, while the investment allocation is the lump sum or premium that one would pay to a Pure Investment Vehicle (Mutual Fund, UITF, direct stock trading) for BTID. I was fortunate to have had the opportunity and time to gather different VUL and Term Insurance Policies, and according to my evaluation, the Cost of Insurance (plus Accidental Death Benefit and Total Disability Waiver) for VUL and Term Life are just the same, while in some cases, the Costs of Insurance of certain VUL Products are lower than their term insurance counterparts. Most BTID Advocates confuse the Premium/Administrative Charges of a VUL Product with the Cost of Insurance.

    17. In relation to the Cost of Insurance, while most Insurance Companies determine the Cost of Insurance based on the Insured’s gender, health, age, and death benefit amount, there is one Insurance Company that offers temporary Cost of Insurance for their VUL Policies. This is possible since the computation of the Cost of Insurance is based on the Net Amount at Risk (NAAR) to pay the death benefit. For example, if the death benefit amount is Php 1,000,000.00, and the Fund Value is already at Php 1,000,001, there will be no more Cost of Insurance as far as referred VUL Product is concerned. In the same way, when the Fund Value is at Php 999,999.00, the Cost of Insurance will be computed based on the NAAR which is valued at Php 1.00 only. Per my evaluation of the comparison matrix, all other Insurance Companies charge continuous Cost of Insurance.

    18. Kudos to this engineer who made actual computations on investment returns for BTID and VUL. However, as I was familiar with the terminologies used in product proposals of different Insurance Companies, I am sure that the VUL product proposals used in the particular study came from a certain Insurance Company that charge high premium rates in comparison to its counterparts (the company requires 10-year payment of premium charges and 5-years of other monthly charges on-top). Therefore, think about how soon the investment returns of BTID will be overtaken by that of Protection-Oriented VUL Policies which charge low premium rates and shorter premium-charge paying period (<3 years).

    Check this article:

    19. We have established, per Item Nos. 16 and 17, that because of temporary Cost of Insurance, one specific VUL Product will be less expensive than BTID. To arrive at a more general conclusion to include other VUL Products that charge continuous Cost of Insurance, we should look at the bigger picture.

    Often, accidents and sicknesses do not lead to instant death. In most cases you just need to stay in the hospital for treatment, but it can cost a lot of money. Unfortunately, the Life Insurance will not pay the insured anything if he/she is just hospitalized. Unexpected emergencies could take a huge toll on one’s life savings or if none, can give us a lot of financial problems. That’s why one needs to be covered by healthcare insurance. VUL Products address healthcare concerns thru optional riders (i.e., critical illness benefit, hospital income benefits, etc.). These riders pay lump-sum benefits to the insured for medical expenses. Compared with healthcare plans from HMOs (medicard, maxicare, insular, etc.), optional riders can be added to a VUL Policy Plan at much lower additional premium.

    Thank you.

  83. may point naman yung “personal blog or opinion ng writer” but very biased and the supporting materials are outdated.Understand the product and benefits first before getting it, iba-iba naman yung purpose and NOT everyone has time and expertise on pure stock market

  84. This blog really answer my question/doubts in buying VUL since I am single with no responsibilities but myself. INVEST, INVEST, INVEST, buy insurance separately. Thank you Salve, your a savior.

  85. Share ko lang experience for the VUL, I have PRU and Sun since 2012. Kung inexpect na babalik yung pera mo ng 100% e impossible. Better to save in the bank. Nag partial withdraw ako ng december 2017 but still negative parin yung fund value vs premiums. Walang wala sa projections na binigay during ng start. Tinuloy ko nalang for my protection and not as investment, sayang din since 10 yrs lang naman.

  86. Hope you could help me…Kumuha po kasi ako ng VUL life insurance sa bdo last year. To make the story short, di ko na po sya mabayaran at need ko po ng pera now. Kaya po naisipan kong iwithdraw yung initial payment ko po na 30k. Ngaun po galing ako sa branch and sabi nila sakin wla daw po ako makukuha since di ako nakabayad for this year at naglapse na daw po. Nakakalungkot lang na ganun pala ang policy na nakuha ko. Di ko po inexpect na pag di ako makapagbayad, eh parang napunta lang sa wala yung 30k ko. Iniisip ko po tuloy kung itutuloy ko pa.ano po sa tingin nyo ang maganda gawin? At tama po ba na wala akong makukuha kahit singko kapag iwinithdraw ko?

  87. Hi Fitz, I got a VUL in 2015. It was placed in a Balanced Fund. Is it wise to transfer it now to Equity Fund? I intend to use my VUL as my long-term investment.

  88. Hello Fitz, i totally agree with all your points! i just realized i had a wrong decision in getting my VUL when i was in my third year. But of course, so as not to incur further losses (i.e. due to the charges and fee) i kept it and continued my contributions and just plan to redeem everything on the 6th or 7th year (this 2019) with the anticipation that my money has grown and earned. I realized if my goal or intention was to have pure investments, then i should have put my money in stocks or mutual funds instead and not VUL! … Im happy to read your article which i affirmed my thoughts 🙂

  89. What i like about VUL is that if anything happens to the me, my beneficiary will not have a hard time getting my investment. Unlike if i put it in banks, mutual funds, which require more documentation and processes before my beneficiary gets my investments. Also, its another way of avoiding the estate tax. I don’t want to leave hassle to my family.

  90. You are wrong Grace Mkl, all of Financial Institutions like insurance, banks, etc require documentation like death cert, IDs, etc. Even in partial withdrawal, I even have to get the consent of irrevocable beneficiaries like your husband or wife, children and then verify their identities. They also require a witness from their company, representative or agent. For the estate tax, the proceeds from life insurance benefit is exempted but the proceeds from the investment shall be subject to estate tax.

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