VUL Insurance Isn’t Cheap—But There’s a Reason

Let’s get this out of the way: VUL insurance costs more than traditional term life insurance. But that’s because it’s more than just insurance. You’re not only paying for a death benefit—you’re also contributing to an investment account that can grow over time.

When I started my policy, my premium was $250 a month. At first, it felt steep. But my agent explained that the premium covered multiple things:

• The cost of insurance (COI) for the death benefit
• Administrative and policy fees
• Charges for any added riders (like critical illness or accidental death)
• And—most importantly—a portion that went into investment sub-accounts

In short, you’re paying for protection and potential wealth-building. That’s what makes VUL unique—but also what makes it costlier upfront.

The Breakdown: Where Your Money Actually Goes

Most people assume that their full premium goes into investments. I did too, until I saw my policy illustration. In reality, several layers of deductions reduce your invested amount. Here’s how it typically breaks down:

• Cost of Insurance (COI): This increases with age, because your mortality risk rises.
• Policy fees: These cover administrative expenses. Some are fixed; others scale based on the size of your policy.
• Premium load: A percentage deducted from your premium before it’s allocated to investments.
• Fund management fees: Charged by the investment funds managing your policy’s cash value.

When I reviewed my annual statement after the first year, I realized about 20% of my total premium went to fees and charges. The rest was invested. That realization helped me manage my expectations about returns—and avoid premature disappointment.

Is the Cost Worth It?

Whether or not the cost is “worth it” depends on your goals. For me, I wanted:

• Life insurance coverage that didn’t expire like term policies
• Discipline in investing—VUL forced me to contribute monthly
• A product that would give my family a legacy and financial cushion

So yes, despite the higher cost, the dual benefit of protection and growth made sense for me. But that may not be the case for everyone.

If you’re mainly looking for affordable protection, term insurance might be better. If you want to maximize investment returns, direct investing in mutual funds or ETFs may suit you more. VUL is for people who want both—with the understanding that the cost comes with long-term advantages.

Factors That Affect Your VUL Cost

Your monthly or annual premium can vary greatly depending on:

• Your age: Younger policyholders pay lower COI charges.
• Your health: Better health often means lower rates.
• Coverage amount: Higher death benefits result in higher costs.
• Riders: Each add-on increases your premium.
• Company policy: Some companies charge more for administrative fees and fund management.

When I shopped around, I was surprised at how much quotes varied for the same coverage. One company offered me a $1 million death benefit for $180/month, while another quoted $240/month. The devil really is in the details.

VUL Cost in the First 5 Years

One of the biggest shocks new policyholders face is how slow the investment portion grows in the beginning. That’s because more of your premium goes to covering initial charges and setting up the policy.

For example, in my first year, my $3,000 total contribution only resulted in about $2,400 in invested funds. But by year six, more than 90% of my premiums were going into investments. Patience is key.

Tips for Managing the Cost of VUL

1. Start young: The earlier you begin, the cheaper the cost of insurance.
2. Choose a reputable company: Low fees and good fund performance make a difference.
3. Review your policy regularly: Adjust your investment allocations and coverage as needed.
4. Don’t lapse: Missing payments can eat into your cash value or cancel the policy.

I made the mistake of skipping one month’s payment in year two. While my policy didn’t lapse, it dipped into my investment portion to cover charges. It was a wake-up call to stay consistent.

Disclosure About VUL Costs

Important:The cost structure of VUL insurance varies widely depending on the company, country, product design, and even rider selections. This article shares personal experiences, but your actual costs may differ. Always ask for a complete policy illustration and consult with a licensed insurance advisor before buying.

VUL Isn’t Free, But It Can Be Valuable

The cost of VUL insurance might feel high at first glance—but that’s because you’re getting more than just coverage. If you’re the kind of person who wants to protect your loved ones and build wealth at the same time, then the value VUL provides may outweigh the cost over time.

Just be sure to go into it with eyes wide open. Ask the tough questions. Read the fine print. Understand where your money is going. That way, you won’t just be buying insurance—you’ll be making a smart, informed financial decision for your future.