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VUL vs. Equities: Everything You Need To Know

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Variable universal life insurance (VUL) is a type of permanent life insurance with a variable premium, a fixed death benefit, and investment options similar to mutual funds. As long as you pay your premiums, VUL insurance products guarantee everlasting coverage.

VUL insurance has to invest sub-accounts that allow the cash value to be invested. The subaccounts behave similarly to a mutual fund. Market swings can result in big gains, but they can also result in significant losses. The name of this insurance comes from the fluctuating returns of investments in an ever-changing market. While VUL insurance provides more flexibility and development potential than standard cash value or whole life insurance, policyholders should weigh the risks before acquiring it.

Features of VUL

  1. Cash value component – VUL policies include a cash-value component that increases over time. It works by way of an integrated savings account that is funded by a portion of the policy’s premiums and invested in growing during the policyholder’s lifetime. You can access your cash value by withdrawing funds, borrowing funds, or surrendering the policy, depending on the type of insurance. In a life settlement, you could even sell the policy to a third party.
  2. Fixed Death Benefit: Some policy types change the death benefit amount based on how the policy’s savings part develops over time. That is not the case with variable universal life insurance; the death benefit is guaranteed regardless of the policy’s investment performance. If you borrowed against the cash value of a VUL insurance policy, the death benefit would change.
  3. Investment Options: Your VUL cash value is invested in “sub-accounts,” which each have their own investment strategies, such as blue-chip shares or international bonds. You choose a combination of sub-accounts that matches your risk tolerance and overall financial strategy when you start your VUL insurance. Your premiums are then invested in your chosen sub-accounts, less any administrative and insurance fees.


The amount of money that would be returned to a company’s shareholders if all of the assets were sold and all of the debt was paid off in the event of liquidation is referred to as equity. It is the amount of a firm’s revenues less any obligations due by the company that was not transferred with the sale in the case of an acquisition. 

Furthermore, shareholder equity might represent a company’s book value. Equity can be used as a form of payment-in-kind. It also represents a company’s pro-rata ownership of its shares.

How does it work?

The “assets-minus-liabilities” shareholder equity equation offers a clear picture of a business’s finances, easily interpreted by investors and analysts, by comparing real numbers indicating everything the company owns and everything it owes. The capital raised by a firm is known as equity, and it is used to buy assets, invest in projects, and fund operations. A company can normally raise cash by issuing debt (such as a loan or bonds) or equity (by selling a stock). Investors like equity investments because they allow them to participate in a company’s earnings and growth.

The value of an investor’s position in a company, measured by the proportion of its shares, is represented by equity. Shareholders who own stock in a corporation can benefit from capital gains and dividends. Shareholders who own equity will be able to vote on business decisions and board of director elections. These equity ownership benefits encourage shareholders to remain invested in the business.

Negative or positive shareholder equity is possible. If the result is good, the company’s assets are sufficient to satisfy its liabilities. If the balance sheet is negative, the company’s obligations surpass its assets; this is known as balance sheet insolvency. Investors typically consider companies with negative shareholder equity to be risky or dangerous investments. Shareholder equity is not a reliable predictor of a company’s financial health on its own; nevertheless, when combined with other tools and measures, an investor can effectively assess an organization’s health.

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