To clarify how variable universal life insurance sits in the broader context of life insurance, let’s compare it to other major products:

Whole Life Insurance

Whole life is a traditional form of permanent life insurance providing a guaranteed death benefit and guaranteed cash value growth at a rate (or dividend) set by the insurer. Policyholders typically have fixed premiums, and there is no exposure to market fluctuations. While it offers predictability, it lacks the possibility for higher returns that variable universal life might provide when markets perform strongly.

Universal Life Insurance

Universal life also provides permanent coverage, with flexible premiums and adjustable death benefits. However, its cash value is typically credited a fixed rate set by the insurer or tied to a market index (in the case of indexed universal life). Unlike variable universal life, universal life policyholders do not allocate funds into discrete investment subaccounts. This means less direct market exposure but also less potential for high returns.

Term Life Insurance

Term life covers a set number of years—often 10, 20, or 30 years. After the term ends, the coverage typically expires (or can be renewed at a higher rate). Term life tends to be far cheaper than permanent coverage, especially for younger individuals, but it offers no cash value component. Some people prefer “buy term and invest the difference,” while others appreciate the integrated approach of variable universal life.

Variable Life Insurance

Variable life is closely related to variable universal life but lacks the “universal” aspect of flexible premium payments. With variable life, premiums are often fixed, though subaccounts still offer market-linked investment potential. Variable universal life, conversely, merges that variable investment aspect with the premium flexibility of universal life.