While VUL is a type of universal life insurance, there are variations:

Traditional Universal Life (UL)

This version credits a fixed or floating interest rate set by the insurer to your cash value. There are no investment subaccounts, so returns are more stable but typically lower than what you might achieve through equity or bond markets. Risk-averse individuals often favor this approach.

Indexed Universal Life (IUL)

IUL ties your cash value’s growth to a market index, such as the S&P 500. You’re not directly invested in equities. Instead, the insurer uses a crediting formula based on index performance, sometimes with caps on gains or floors on losses. IUL can limit downside risk compared to VUL, but it also can restrict upside potential if the index performs exceptionally well.

Variable Universal Life (VUL)

In contrast, VUL invests in subaccounts that track equities, bonds, or other market instruments. You capture full upside potential but also bear the risk of market downturns. If you have a longer horizon and understand investing, VUL could be attractive. If you want a middle ground, indexed universal life might be more appropriate, while a conservative approach might favor traditional universal life.