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What is VUL Insurance in the Philippines: Benefits and Risks

Last updated: June 15, 2023
Written by: Alyssa Divina | Reviewed by: Digido Financial Writers Team

Key takeaways:

  • VUL insurance is gaining popularity because it’s both an insurance and investment package that lets you benefit from both at the same time
  • VUL insurance is a great option for those who want to make a profitable investment and get more out of their money
  • VUL policies can be complex, with a variety of fees, charges, and investment options


What is VUL Insurance in the Philippines

Are you worried about your finances or looking to grow your finances during an economic standstill, consider investing in Variable Universal Life (VUL) insurance. VUL insurance is a great option for those who want to make a profitable investment and get more out of their money.It’s gaining popularity because it’s both an insurance and investment package that lets you benefit from both at the same time. Read on to learn more about this increasingly popular financial option

What Is Variable Universal Life (VUL) Insurance

Variable Universal Life (VUL) is a type of life insurance policy that has both an insurance and investment component. The insurance part of the policy provides a death benefit to the policyholder’s beneficiaries upon their passing. The investment component, on the other hand, allows the policyholder to invest part of their premiums into various investment options such as mutual funds, stocks, and bonds.

One of the unique features of VUL is the ability to adjust the death benefit and investment allocation according to the policyholder’s changing needs and risk tolerance. This flexibility makes it a popular choice for those who want a life insurance policy that also provides an opportunity for growth and potential tax benefits. However, it’s important to note that like any investment, VUL carries a degree of risk, and investment performance can vary based on market conditions.

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How does Variable Universal Life Insurance work

In the Philippines, Variable Universal Life (VUL) insurance works similarly to other countries. VUL policies are offered by insurance companies and allow policyholders to invest part of their premiums in various investment options, such as mutual funds, stocks, and bonds, while also providing a death benefit to their clients.

VUL policies in the Philippines are regulated by the Insurance Commission (1), which sets guidelines and standards for insurance companies and agents. Insurance companies are required to disclose information about the investment options, fees, and charges associated with the policy to ensure transparency and protect consumers.

The combination of both subaccounts and insurance in VUL provides policyholders with the potential for investment growth while also providing protection for their loved ones. VUL insurance is becoming increasingly popular due to its unique combination of investment and insurance, providing policyholders with a comprehensive financial planning solution.

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How Subaccounts Work in VUL insurance

Subaccounts in VUL insurance are investment options that policyholders can choose to allocate their premiums into. These subaccounts are similar to mutual funds and can invest in various asset classes such as stocks, bonds, and money market funds.

Policyholders typically have the option to choose from a variety of subaccounts offered by the insurance company, each with its investment objective and risk level. Value of the subaccount may fluctuate based on market conditions and investment performance.

One of the benefits of subaccounts in VUL insurance is the flexibility they offer. Policyholders can adjust the allocation of their premiums between subaccounts as needed, allowing them to tailor their investment strategy to their changing needs and risk tolerance.

Additionally, the investment earnings generated by the subaccounts are generally tax-deferred, which means that taxes are only paid when the policyholder withdraws the money from the subaccount.

Advantages of  Variable Universal Life Insurance Philippines

1. Investment and Insurance Combined

VUL policies provide both insurance and investment components in one package, making it a convenient and practical option for those who want to secure their financial future while maximizing their investment potential.

2. Potential for Higher Returns

VUL policies offer investment options that have the potential for higher returns compared to traditional savings accounts or time deposits.

3. Flexibility

VUL policies allow for flexibility in terms of the amount and frequency of premium payments, as well as the investment allocation. This allows policyholders to adjust their policy to their changing needs and risk tolerance.

4. Tax Benefits

One of the advantages of VUL insurance in the Philippines is its potential tax benefits. Under the Philippine Tax Code (2) premiums paid for life insurance policies, including VUL, are tax-deductible up to a certain amount. Additionally, the death benefit is typically tax-free for the beneficiaries.

5. Estate Planning

VUL policies can also be used as an estate planning tool, allowing policyholders to leave a tax-free legacy to their beneficiaries.

6. Creditor Protection

In the event of bankruptcy, VUL policies may offer protection against creditors, as the policy’s cash value is typically considered exempt from creditors. In simpler terms, if the policyholder were to face bankruptcy, their creditors may try to seize their assets to repay their debts.

However, the cash value of a VUL policy may be considered protected from creditors, meaning that it may not be included in the assets that can be seized by the creditors. This protection can provide peace of mind for those who may be at risk of bankruptcy or facing financial difficulties, as their VUL policy can provide a level of protection for their financial future.

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Let’s look at an example of how investing in VUL can yield great results. John’s experience with his VUL policy:

John bought a VUL policy and invested in a well-diversified portfolio of mutual funds. Over the years, the markets performed well, and John’s investment grew steadily. He also paid his premiums on time, ensuring his life insurance coverage. As a result, John’s VUL policy’s cash value grew significantly, and he was able to borrow against it for emergencies or withdraw money for his child’s college education. Eventually, John decided to surrender the policy and received a lump sum that exceeded his total premiums paid, resulting in a nice profit.

Disadvantages of VUL insurance

To compare the pros and cons нere are some potential disadvantages of VUL policies in the Philippines:

  • VUL policies often have high fees and charges, which can eat into the investment returns and reduce the cash value of the policy.
  • Complexity. VUL policies can be complex, with a variety of fees, charges, and investment options that can be difficult to understand.
  • Market risk. The value of the subaccounts in a VUL policy is subject to market fluctuations, and the policyholder may not receive the expected returns if the market performs poorly.
  • Surrender charges. If the policyholder wants to withdraw funds from the policy’s cash value, they may be subject to surrender charges, which can be high in the early years of the policy.
  • The insurance component of a VUL policy can be more expensive than other types of life insurance, particularly if the policyholder is older or has pre-existing medical conditions.

It’s important for individuals to carefully evaluate the costs and risks associated with VUL policies before investing, and to consult with a licensed financial advisor to determine if a VUL policy is the right choice for their financial situation and goals.

Let’s look at an example of how investing in VUL can have both ups and downs. Samantha’s experience with a VUL policy highlights the risk of market fluctuations:

Samantha also bought a VUL policy and invested in a portfolio of mutual funds. Unfortunately, the market experienced a significant downturn, and Samantha’s investments lost value. As a result, the cash value of her policy decreased, and her premiums were not sufficient to maintain the death benefit. Samantha had to choose between increasing her premiums or reducing her death benefit, both of which resulted in a financial burden. She opted for reducing her death benefit, which left her with less insurance coverage than she needed. Additionally, Samantha had to pay surrender fees if she wanted to cancel her policy, which further reduced her returns.

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Payment and Сontribution for VUL insurance

The payment and contribution calculations for VUL policies in the Philippines can vary depending on the specific policy and insurance company. Generally, policyholders can choose the amount of premium they want to pay on a regular basis, which can be monthly, quarterly, semi-annually, or annually.

The premium payments are allocated into different subaccounts that the policyholder chooses, based on their investment preferences and risk tolerance. The insurance company deducts fees and charges from the premium payments, including mortality and expense fees, administrative fees, and investment management fees.

The policy’s cash value and death benefit are determined based on the performance of the underlying investments in the subaccounts.

Here’s a simplified overview of how the money flows through the VUL system:

  1. Policyholder selects a VUL policy from an insurance company and applies for coverage.
  2. Insurance company approves the application and sets up a policy for the policyholder.
  3. Policyholder selects subaccounts to invest in, based on their risk tolerance and investment goals.
  4. Policyholder makes premium payments to the insurance company on a regular basis, which are allocated to the selected subaccounts after fees and charges are deducted.
  5. The value of the subaccounts may fluctuate based on market performance and the asset allocation of the subaccounts.
  6. The insurance company may adjust the subaccount allocations over time to reflect changing market conditions and investment objectives.
  7. The policyholder may withdraw funds from the policy’s cash value, subject to surrender charges and other fees.
  8. In the event of the policyholder’s death, the beneficiaries receive the death benefit, which is generally tax-free.

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Which is Better VUL or Traditional Insurance

Life insurance is generally a better option if you are primarily concerned with protecting your family’s financial future in the event of your death. It provides a guaranteed death benefit to your beneficiaries, and the premiums are typically lower than those of VUL policies.

On the other hand, VUL is a better option if you want both protection and growth potential for your money. VUL policies allow you to invest in various subaccounts that can potentially earn higher returns over time, but they also come with higher fees and risks.

Who is Suited for VUL Philippines

Variable Life Insurance (VUL) may be best suited for individuals who have a long-term investment horizon and want to combine life insurance protection with the potential for investment returns.

It may also be suitable for those who have a high risk tolerance and are comfortable with market volatility, as the value of the policy’s subaccounts is subject to market fluctuations.

Additionally, VUL policies may be a good option for those who want flexibility in terms of premium payments and investment allocation.

VUL Philippines

What Insurance Companies Offer VUL Policies in the Philippines

There are several insurance companies that offer VUL policies in the Philippines, including but not limited to:

  • Sun Life Financial
  • AXA Philippines
  • Philam Life
  • Pru Life UK
  • Manulife Philippines
  • FWD Life Philippines
  • BPI-Philam Life Assurance Corporation
  • Allianz PNB Life Insurance, Inc.
  • Insular Life Assurance Company, Ltd.
  • AIA Philam Life Assurance Corporation.

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Whether VUL is a good investment depends on the individual’s financial goals and risk tolerance. VUL policies offer the potential for investment growth through their subaccounts, but they also come with fees and charges that can affect returns. Additionally, the performance of the subaccounts is subject to market conditions and the asset allocation selected by the policyholder.

VUL policies can be a good investment for those who want a combination of life insurance protection and investment growth potential, and who are willing to accept the risks and costs associated with the policy.


  • What is Variable Universal Life (VUL)?
    Variable Universal Life (VUL) insurance is a type of life insurance that consists of two main components - subaccounts and insurance.
  • How is VUL different from traditional insurance?
    Variable Universal Life (VUL) insurance differs from traditional insurance in that it has an investment component in addition to the death benefit. Policyholders can allocate their premiums to subaccounts, which invest in various asset classes and provide the potential for investment growth. Traditional insurance, on the other hand, typically only provides a death benefit to the beneficiaries of the policy.
  • What can VUL policies invest in?
    VUL policies can invest in various asset classes, such as stocks, bonds, and money market funds. The specific investment options available will depend on the insurance company offering the VUL policy.


Alyssa Divina
Author pages:
Alyssa Divina pens blog articles about a wide range of topics, such as money matters and government transactions in the Philippines. Prior to joining Digido Finance Corp., she served as a journalist for Charlton Media Group, a business news magazine, for two years. She holds a degree in Journalism from the University of the Philippines Diliman.
Digido Financial Writers Team is a team of experts in the field of finance and credit, specializing in writing articles for Digido blogs.
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