First of, what is a VUL?
VUL basically stands for Variable Universal Life. This is a kind of plan in the Philippines that offers insurance with an investment component that you can use sometime in the future. Getting a VUL insurance plan is just one of many other ways that you can do to achieve financial security. VUL insurance could also be the answer for you to achieve your ideal retirement fund or college fund for your children.
So what’s with VUL that makes it an ideal startup to achieve financial security? Let me share these 8 reasons that I personally realized since I had my first ever VUL insurance plan at the age of 22. 🙂
Back when I was a college student, I already realized the importance of having insurance, especially at an early age. Thanks to our curriculum and to my hardworking professor during that time who patiently taught the idea of insurance. Since then, it has become one of my goals to get insurance after college.
When I started working, I knew my contribution that I give monthly to my family was already a big help to sustain our daily expenses. I can feel that there’s already a need for income protection. In case something unexpected happens to me, I don’t want my family to suffer financial burden. I still want them to feel that I still care for them even if God calls me home today.
So when I looked for plans in the Philippines, I came across this VUL investment which is trending especially for millennial. I knew it. This was the plan I’m looking for. My only goal was to acquire an insurance plan after college, yet, I’ve found a plan that offers a bonus of investment where I can invest in a mutual fund like investment.
I graduated from college last 2014 and got my VUL plan last 2016. This decision has just crossed out 2 out of the 8 goals that I’ve posted last March 18, 2014 in my Instagram account.
2. Diversified Investment
VUL insurance plan offers a bonus of investment where you can choose from different funds depending on your risk appetite. Some of these are equity fund, balanced fund, bond fund and money market fund. These funds give you the opportunity to have a mix of investments that manages the risk of losing so much money. VUL offers a diversified investment that gets you invested in several companies and give you potential returns that can still beat inflation, time deposit, and bank interest rates.
As for me, my current VUL insurance plan is invested in equity and index fund. Yes, you have the option where to allocate your fund and what percentage you want to set for each fund. I decided to choose those aggressive funds since I’m still young and kicking and actually, those funds suit my long-term goals.
3. Long Term
When you acquire a VUL insurance plan especially a regular pay one, you need to set your mind that the investment part can only be realized in the long run. Remember, the main focus of VUL plan is still insurance and for protection purposes. The investment part is only a bonus that the plan offers and gives flexibility to it.
If you’re planning to get the investment or what we called “fund value” within 1 to 5 years, expect that the money you will get won’t be equal to the amount you have invested in. Why? It’s because, for the first few years of a regular pay VUL plan, a big percentage of the premium goes to insurance charges. Please take note that this plan is not recommended for short-term goals. Might as well, set up a different fund instead.
As I’ve mentioned earlier, the investment part of a VUL insurance plan gives flexible options to the policyholder.
First, the policyholder has the option to put amount more than his regular premium. Any amount in excess of the regular premium becomes an additional investment to the plan; therefore, the fund value accumulates faster from what is originally projected from the proposal.
Second, the fund value of the plan can cover your premium dues in case you forgot to pay for it, or you got short for a certain period of time.
Term plans give you a 30-day grace period from your due date to pay for the plan. Once not paid, the plan automatically lapses and you’re not covered anymore. The problem here is, what if you’re not insurable once the plan lapses in that short period of time?
With VUL, the fund value lets you buy time until you are able to pay for the plan. The 30-day grace period that VUL offers will just start if the fund value is already not enough to cover the charges. You see, as long as there is enough fund value to cover the insurance charges, VUL insurance plan still got you covered against an unexpected event.
Third and for the worst case scenario, in case you still want the plan to be in force but there’s not enough fund value and you cannot pay your regular premium anymore because of some kind of financial problem, you have the option to only pay the charges. Sounds good?
Starting as low as P1,500 per month for a 23-year old female and non-smoker, payable for 10 years (that’s only P750 per cut-off), you can already get a coverage of P700,000 and can expect a fund value of P2Million at the age of 65. What if you can afford more, right?
If you’re having doubts that you might not be able to pay the plan for 10 years long, don’t mind them. Believe me, I also have that mindset before. I got my VUL plan during my stable years in a job but later on, I decided to resign. I don’t have savings at all. But since I really knew the importance of insurance and investing early, I made different ways just to pay for my VUL insurance plan continuously.
Also, don’t say you still can’t afford it if you’re able to eat in a fast food chain, buy “sosyaleng” coffee or even travel out of town. It’s just about priorities and what you really want to be in the future. As they say,”Kapag gusto, may paraan. Kapag ayaw, maraming dahilan.”
6. Limited paying period
VUL insurance plans offer limited paying period for 5 to 10 years, even a one-time payment scheme. As for Sun Life, we offer Sun Maxilink Bright which is payable for at least 5 years and Sun Maxilink Prime which is payable for at least 10 years. For onetime payment plans, we have Sun Flexilink1 and Sun MaxilinkOne.
This feature of VUL lets potential clients choose how long they are comfortable paying the plan and how much are they willing to set aside just to start their journey to financial security. The longer the plan, the more it is affordable.
As for me, I currently have Sun Maxilink Prime.
7. Develops the Habit of Investing
VUL plan was my first ever “serious” investment I had after college. Since I have premium dues to pay so my plan will continuously be in force during my paying period, my saving and investing habit was slowly developed. I was able to save religiously and find another investment vehicle to sustain my other goals in life.
Sadly, some millennial just open a pure investment account and then, later on, was not able to continue investing regularly. Take note that when you started investing, you should do it regularly especially if you have goals you want to achieve in the future. If you really want to achieve those goals, consistency is the key.
Fortunately, I’ve developed that consistency with a VUL plan.
8. Additional Benefits
Lastly, and the top reason why a VUL plan is really ideal for me is the additional benefits the plan offers to potential clients.
These additional benefits are what we called riders. These are optional benefits that you can add to the VUL plan for an additional cost which will give you additional coverage and protection for contingencies such as accidents, disability, and illnesses.
Acquiring a VUL plan at the age of 22 was the best decision I’ve ever made after I graduated. I learned how to value my hard-earned money and budget them wisely. That decision was my stepping stone to find other investments to sustain my other goals. It’s because I knew I have developed the consistency and commitment needed when it comes to investing.
I hope this article took away your doubts of getting a VUL insurance. VUL plans were developed not to compete with other investments but to help you achieve some of your goals. They are here to help you decide what affordable investment you can have during your early years in work.
If you think this plan suits your goals, feel free to fill up the form below and I’ll send a proposal directly to your email.
Let’s meet and take a step closer to financial freedom!
Christine Caranyagan is a Licensed Financial Advisor, a Certified Investment Solicitor (CIS), Associate Wealth Planner (AWP), and Associate Estate Planner of the Philippines (AEPP).
Her mission is to help fellow Filipino people achieve lifetime financial security & healthier lives.
If you want to learn more about financial planning, she conducts it for FREE. Her office is located at 15F Frabelle Business Center 111 Rada Street, Legaspi Village Makati City.
Or you can just reach her thru this number: 0935 7368 619 or send her a message here.
It will be her pleasure to be your Financial Advisor for Life.