VUL Investment - Insurance. Clearing up the confusion of Filipino Wealth Builders.

By: Christian Ramos, L.F.A

SJ&P | Licensed Solicitor for Investments and Insurance

Variable Universal Life (VUL) insurance is a widely discussed yet often misunderstood financial product in the Philippines. It is marketed as a combination of life insurance, investment, and retirement fund, but has faced criticism from policyholders. This article aims to clarify misconceptions about VUL to aid informed financial decisions.

Misconception 1: VUL Is Mainly an Investment

The Reality: VUL is primarily life insurance with an investment feature. Premiums first cover insurance costs and fees before being invested. Insurance and investing should be separate, with VUL evaluated for its insurance value first.

Misconception 2: You Can Withdraw All Your Premiums Anytime

The Reality: Withdrawals are limited to the fund value, not total premiums paid. Initial costs and fees mean only a portion is invested, making VUL a long-term product.

Misconception 3: VUL Gives You "Tax-Free" Money

The Reality: Tax benefits are conditional. Death benefits are tax-free, but withdrawals beyond premiums are taxable unless structured as policy loans.

Misconception 4: "Flexible Premiums" Means It's Safe to Skip Payments

The Reality: Premium flexibility is a management tool, not a safety net. Skipping payments can deplete the fund value, risking policy termination.

Misconception 5: VUL Is a Good Replacement for Retirement Savings

The Reality: VUL should not take the place of dedicated retirement accounts because of its higher costs. It is more appropriate as a supplementary estate planning tool once other retirement savings have been maximized. However, with advancements in financial products, some VULs now operate like ETFs with reduced costs.

Interested in exploring your options and seeking advice from our writer? Click here > to book an online consultation with him today.

Misconception 6: All VUL Policies Are the Same

The Reality: Policies vary significantly in cost, fund options, and terms. Compare providers and scrutinize details before deciding.

When Does VUL Make Sense for Filipino Families?

VUL can be suitable for those with dependents, maximized retirement savings, a long-term horizon, comfort with market risk, and a need for life insurance in estate planning. It is not a standalone solution but part of a comprehensive wealth plan.

Unique Market Factors in the Philippines

The appeal of VUL is influenced by OFWs, family dependency, and legacy culture. Currency volatility drives demand for dollar-denominated policies. Regulatory changes have improved disclosure requirements.

What Clients Should Remember

Confusion often arises from sales tactics. Work with advisors who prioritize your interests. Demand transparency on costs, realistic projections, and risk scenarios. VUL is a tool, not a universal solution. Good financial planning requires understanding product costs and limitations.

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Professional Profile

Christian Ramos, L.F.A, has fulfilled all the licensing requirements established by the SEC and the Philippine Insurance Commission for both individual and corporate sectors. As a graduating Electrondics Engineer student from the esteemed U.P. Diliman, he is currently completing his professional residency at SJ&P Wealth Advisory, where he provides comprehensive investment guidance expertise.

Schedule a consultation with Christian by emailing christian.ramos@sanjoseandpartners.com or click here to book an online meeting today.