Best Variable Life Insurance Guide (2025 Update)

Choosing the right life insurance policy can feel overwhelming. You want protection for your loved ones, but maybe you’re also looking for ways to grow your money over the long term. If you’ve heard about policies that combine a death benefit with investment potential, you might be exploring Variable Universal Life (VUL) insurance. But what exactly is it, and how do you find the “best” variable life insurance policy in 2025?

The truth is, the concept of a single “best” VUL policy is misleading. What’s truly best depends entirely on your individual financial situation, risk tolerance, and long-term goals. VUL is a complex financial product with significant potential upsides but also considerable risks. Understanding it thoroughly is the first step.

That’s where knowledgeable guidance becomes essential. At Insurance By Heroes, we understand the importance of making informed decisions, especially when it involves protecting your family’s future. Our agency was founded by a former first responder and military spouse, and our team is composed of professionals with backgrounds dedicated to public service. We bring that same commitment to serving you. As an independent agency, we aren’t tied to any single insurance company. Instead, we work with dozens of top-rated carriers, allowing us to shop the market and compare various options, including VUL policies, to find the coverage that genuinely aligns with your specific needs and circumstances. This article will break down variable life insurance to help you determine if it might be the right fit for you.

What is Variable Universal Life (VUL) Insurance?

Variable Universal Life insurance is a type of permanent life insurance policy. Like other permanent policies (such as Whole Life), it’s designed to provide coverage for your entire life, as long as the policy remains in force. However, VUL distinguishes itself through its cash value component.

Here’s a breakdown of the key components:

• Death Benefit: This is the amount paid out to your beneficiaries upon your death, typically tax-free. With VUL, the death benefit amount might be flexible (allowing you to increase or decrease it within certain limits, sometimes requiring additional underwriting) and can potentially fluctuate based on the performance of your cash value investments. Some policies offer options for a level death benefit or an increasing death benefit (face amount plus cash value).
• Cash Value: A portion of your premium payments goes into a cash value account. Unlike Whole Life insurance where the cash value grows at a guaranteed (though often modest) rate, or Universal Life where it grows based on current interest rates declared by the insurer, VUL allows you to invest this cash value in various investment options called “sub-accounts.”
• Premiums: VUL policies offer premium flexibility. You can often adjust the amount and frequency of your premium payments, within limits set by the policy contract and IRS regulations. However, paying insufficient premiums can jeopardize the policy’s cash value and potentially cause it to lapse.
• Sub-Accounts: These are the investment portfolios available within the VUL policy. They function much like mutual funds, holding assets such as stocks, bonds, and money market instruments. You typically choose how to allocate your cash value among the available sub-accounts based on your risk tolerance and investment objectives. The value of your cash value account will rise or fall based on the performance of these chosen sub-accounts, minus policy fees and charges.
• Fees and Charges: VUL policies come with various fees, which are deducted from your cash value or premium payments. These can include the cost of insurance (COI), mortality and expense (M&E) risk charges, administrative fees, investment management fees for the sub-accounts, surrender charges (if you cancel the policy early), and fees for optional riders. These fees can significantly impact your cash value growth and overall policy performance.

The core concept of VUL is the combination of lifelong insurance protection with direct exposure to market-based investment performance for the cash value component. This offers the potential for higher returns but also introduces investment risk.

How Does the Cash Value Work in VUL Policies?

Understanding the cash value mechanics is crucial for grasping VUL. When you pay your premiums, the insurance company deducts the policy charges (like the cost of insurance protection and administrative fees). The remaining amount is allocated to the sub-accounts you selected.

These sub-accounts are essentially investment pools managed by the insurance company or third-party fund managers. You might find options ranging from conservative bond funds to aggressive equity funds, international funds, and balanced portfolios. The choices available depend entirely on the specific VUL policy and the issuing insurance carrier.

The value of your sub-accounts directly reflects the performance of the underlying investments. If the stock and bond markets perform well, your cash value has the potential to grow significantly faster than it might in a traditional Whole Life policy. This growth occurs on a tax-deferred basis, meaning you don’t pay income taxes on the gains as they accumulate within the policy.

However, the reverse is also true. If the markets perform poorly, the value of your sub-accounts can decrease. It’s possible for the cash value to decline substantially, potentially even falling to zero if investment losses are severe and ongoing fees deplete the remaining value. This market risk is the defining characteristic and primary drawback of VUL compared to other permanent life insurance types.

You can typically access the cash value in your VUL policy through:

• Policy Loans: You can borrow against your cash value, usually tax-free (as long as the policy remains in force). Loans accrue interest, and outstanding loan balances (plus accrued interest) will reduce the death benefit paid to beneficiaries if not repaid.
• Withdrawals (Partial Surrenders): You can withdraw funds directly from your cash value. Withdrawals up to your basis (the total amount of premiums paid) are generally tax-free. Withdrawals exceeding your basis are typically taxed as ordinary income. Excessive withdrawals can reduce the death benefit and may cause the policy to lapse if the remaining cash value isn’t sufficient to cover policy charges.

Managing the cash value effectively, understanding the investment options, and monitoring performance are key responsibilities for VUL policyholders.

Potential Benefits of Variable Life Insurance

Despite the risks, VUL policies offer several attractive features that make them suitable for certain individuals:

• Potential for Higher Cash Value Growth: The direct link to market investments means VUL offers the possibility of significantly greater cash value accumulation compared to Whole Life or standard Universal Life, especially during strong market periods. This potential appeals to those seeking growth alongside protection.
• Premium Flexibility: Unlike Whole Life with its fixed premiums, VUL allows you to adjust how much and how often you pay (within policy limits). This can be helpful if your income fluctuates, though it requires careful management to ensure the policy remains adequately funded.
• Death Benefit Flexibility: Many VUL policies allow you to adjust the death benefit amount as your needs change over time. Increasing coverage typically requires new medical underwriting, while decreasing it might be simpler.
• Tax Advantages: Like other permanent life insurance, VUL offers key tax benefits:
  • Tax-deferred cash value growth.
  • Generally income tax-free death benefit for beneficiaries.
  • Potential for tax-free access to cash value via properly structured policy loans.
  • Tax-free withdrawals up to the cost basis.
• Access to Cash Value: The ability to take loans or make withdrawals provides a source of funds for emergencies, opportunities, or supplemental retirement income (though tapping into cash value requires careful planning to avoid taxes or policy lapse).
• Permanent Protection: As a form of permanent insurance, VUL can provide coverage for your entire lifetime, ensuring your beneficiaries receive a death benefit regardless of when you pass away, provided the policy stays in force.

It’s important to weigh these benefits against the inherent risks and complexities. Finding the “best” policy isn’t just about maximizing potential growth; it’s about finding a balance that aligns with your comfort level and financial strategy. Because Insurance By Heroes works with numerous carriers, we can help you compare the specific flexibility options and growth potential offered by different VUL products side-by-side.

Understanding the Risks and Drawbacks of VUL

Variable Universal Life insurance is not without significant risks and drawbacks that must be carefully considered. It’s arguably one of the most complex types of life insurance available.

• Market Risk: This is the most significant risk. Because the cash value is invested in sub-accounts tied to market performance, it can lose value. Poor investment returns can erode your cash value, potentially requiring higher premium payments to keep the policy in force or even leading to policy lapse. The death benefit could also be reduced in some policy designs if the cash value performs very poorly over extended periods. If you have a low tolerance for investment risk, VUL is likely not the right choice.
• Complexity: VUL policies are inherently complex. Understanding the sub-account options, tracking investment performance, managing premium payments to ensure adequate funding, and comprehending the various fees requires a higher level of financial literacy and engagement than simpler policies like Term or Whole Life.
• Higher Fees and Charges: VUL policies often come with a more extensive list of fees compared to other types of life insurance. These can include:
  • Mortality and Expense (M&E) Charges: Compensate the insurer for insurance risks and administrative costs.
  • Cost of Insurance (COI): The charge for the pure life insurance protection, which typically increases as you age.
  • Administrative Fees: Flat fees or percentages for policy administration.
  • Sub-Account Investment Management Fees: Similar to expense ratios in mutual funds, these are charged by the managers of the underlying investment options.
  • Surrender Charges: Fees imposed if you surrender (cancel) the policy within a specified period, often lasting 10-15 years or more. These can significantly reduce the cash value you receive if you exit the policy early.
  • Rider Charges: Additional fees for any optional benefits added to the policy.

  These fees are deducted directly from your cash value and can create a significant drag on performance, especially if investment returns are low or negative.

• Policy Lapse Risk: The flexibility in premium payments can be a double-edged sword. If you consistently underfund the policy, or if investment performance is poor and fees deplete the cash value, the policy could lapse. A lapse means you lose your life insurance coverage entirely, and any remaining cash value (after surrender charges) might be returned, potentially with tax consequences if there were gains above your basis. Many VUL policies offer riders that can provide some protection against lapse, but these come at an additional cost.
• Requires Active Management and Monitoring: VUL is not a “set-it-and-forget-it” product. You or your advisor need to regularly review the policy’s performance, the allocation of your sub-accounts, and the adequacy of your premium payments relative to policy charges and your long-term goals.

Navigating these complexities and potential pitfalls is precisely why working with experienced, independent agents is so important. At Insurance By Heroes, our team, rooted in a background of public service, prioritizes educating clients about these risks. Because we are an independent agency representing dozens of carriers, we can objectively assess whether VUL truly aligns with your risk tolerance and financial goals, or if another type of policy from a different carrier might be a safer, more suitable fit.

Who is Variable Life Insurance Best Suited For?

Given its structure, benefits, and risks, VUL insurance is generally most appropriate for a specific type of individual:

• Individuals with a Higher Risk Tolerance: You must be comfortable with the possibility that your cash value could decline due to market fluctuations. If the thought of your policy’s value dropping makes you anxious, VUL is likely not for you.
• Long-Term Investment Horizon: VUL is designed for the long term. The upfront fees and surrender charges mean it’s generally unsuitable if you think you might need to access the full cash value or cancel the policy within the first 10-15 years. The potential for growth is best realized over decades.
• Active Financial Management: Policyholders should be willing to actively monitor their policy’s performance and make adjustments to sub-account allocations or premium payments as needed, or work closely with a financial advisor who will do so.
• Seeking Higher Growth Potential: If your primary goal for the cash value component is to potentially achieve higher returns than available in more conservative permanent policies (like Whole Life or standard UL), VUL offers that possibility through market participation.
• Maxed-Out Retirement Contributions: VUL is sometimes considered by high-income earners who have already maximized contributions to traditional retirement accounts (like 401(k)s and IRAs) and are looking for additional tax-advantaged investment vehicles.
• Need for Premium Flexibility (with understanding): While the flexibility is a benefit, it’s best suited for those who understand the implications of underfunding and are disciplined enough to manage payments appropriately.
• Estate Planning Needs: The potentially large, tax-free death benefit can be a useful tool in estate planning strategies for wealthier individuals.

Conversely, VUL is generally NOT suitable for:

• Individuals with low risk tolerance.
• Those needing guaranteed cash value growth or guaranteed premiums.
• People looking for a simple, low-maintenance life insurance policy.
• Individuals who might need to surrender the policy in the short or medium term.
• Those who haven’t already funded more traditional retirement accounts.

It’s crucial to remember that VUL is just one tool in the financial planning toolbox. Insurance By Heroes was founded by individuals dedicated to service, not just sales. Our commitment is to help you determine if this specific tool is the right one for your specific situation. By comparing options from dozens of different insurance carriers, we can provide an objective perspective on whether VUL, or perhaps another type of policy like Whole Life, Universal Life, or even Term Life, better serves your needs.

Key Features to Compare When Looking for the “Best” VUL Policy

If you’ve determined that VUL might align with your profile, the next step is comparing specific policies. Since there isn’t a single “best” policy, you need to evaluate them based on features that matter most to you. Here’s what to look closely at:

• Sub-Account Options and Quality:
  • Variety: Does the policy offer a wide range of investment choices (e.g., domestic/international stocks, bonds, balanced funds, index funds, specialty sectors)?
  • Fund Managers: Are the sub-accounts managed by reputable investment firms with strong track records?
  • Performance History: While past performance doesn’t guarantee future results, review the historical returns of the sub-accounts (net of fees) compared to benchmarks.
  • Expense Ratios: Examine the management fees associated with each sub-account. Lower expenses mean more of the investment return stays in your policy.
• Fees and Charges Transparency and Competitiveness: This is critical. Compare the following across different policies:
  • Mortality & Expense (M&E) charges (often a percentage of cash value).
  • Cost of Insurance (COI) rates (how steep is the increase with age?).
  • Policy administration fees (flat dollar amounts or percentages).
  • Surrender charge schedule (how high are the charges and how long do they last?).
  • Loan interest rates (fixed or variable, and the rate charged vs. credited).
  • Fees for riders.

  Lower internal costs significantly improve the policy’s potential for net growth. Insist on seeing a detailed breakdown of all potential charges.

• Policy Design and Flexibility Features:
  • Premium Flexibility Rules: Understand the minimum and maximum premium limits and the consequences of varying payments.
  • Death Benefit Options: Level, increasing, or return of premium options? How easy is it to change the face amount later (and what are the underwriting requirements)?
  • Riders: What optional benefits are available? Common riders include Waiver of Premium (covers premiums if disabled), Guaranteed Minimum Death Benefit (ensures a minimum payout regardless of investment performance), Overloan Protection, Accelerated Death Benefits (access funds if terminally ill), and Long-Term Care riders. Evaluate the cost and benefit of each rider relevant to your needs.
• Carrier Financial Strength and Reputation: Life insurance is a long-term promise. Choose an insurer with high ratings for financial stability from independent rating agencies like A.M. Best, Standard & Poor’s (S&P), Moody’s, and Fitch. Look for ratings of A or better. Also consider the insurer’s customer service reputation.
• Policy Illustrations: You will be shown illustrations projecting future policy values based on assumed rates of return and fees. Understand these are *projections*, not guarantees (unless explicitly stated as guaranteed). Pay close attention to:
  • Assumed Rate of Return: Is it realistic? Ask to see illustrations based on lower or even 0% returns to understand the impact of poor performance and fees.
  • Guaranteed Elements: Clearly identify what aspects (if any) are guaranteed, such as maximum COI rates or minimum interest rates (though minimums in VUL are often 0% before fees).
  • Impact of Loans/Withdrawals: Ensure illustrations show how accessing cash value affects future performance and the death benefit.

  Be skeptical of illustrations showing consistently high, linear rates of return. Market performance is volatile.

Comparing these features across multiple VUL policies from different carriers is a complex and time-consuming task. This is where the value of an independent agency like Insurance By Heroes truly shines. We have access to policy details and illustration software from dozens of companies. We perform this detailed comparison for you, tailoring the analysis to your specific financial situation, risk tolerance, and objectives, ensuring you see options that are genuinely competitive and suitable for *you*, not just what one particular company offers.

How Insurance By Heroes Helps You Navigate VUL Options

Choosing life insurance, especially a complex product like VUL, is a significant decision. At Insurance By Heroes, we approach this responsibility with the same dedication to service that defines the backgrounds of our team.

Our founder, a former first responder and military spouse, built this agency on the principles of trust, integrity, and putting clients’ needs first. Many members of our team also come from careers in public service, reinforcing our core mission: to protect and serve our clients with unbiased, expert guidance.

This commitment is amplified by our structure as an independent insurance agency. Here’s why that matters when considering VUL:

• Unbiased Advice: We are not captive agents obligated to push the products of a single insurance company. Our loyalty is to you, our client. This freedom allows us to objectively evaluate whether VUL is truly appropriate for your situation.
• Access to the Market: We partner with dozens of the nation’s top-rated insurance carriers. This broad access enables us to compare a wide array of VUL policies (and their alternatives) side-by-side. We can find the features, sub-account options, fee structures, and riders that best match your specific requirements.
• Personalized Needs Assessment: We don’t believe in one-size-fits-all solutions. We take the time to understand your complete financial picture: your income, assets, liabilities, short-term and long-term goals, family situation, and, crucially for VUL, your tolerance for investment risk.
• Detailed Comparisons: We leverage our expertise and technology to analyze the intricate details of competing VUL policies – comparing fees, historical sub-account performance (where available), policy mechanics, and illustration scenarios based on realistic assumptions. We break down the complex jargon into clear, understandable terms.
• Education and Transparency: Our goal is for you to make an informed decision with confidence. We explain the potential benefits, the significant risks, and the costs associated with VUL. If VUL isn’t the right fit, we’ll tell you why and explore other types of insurance that might better serve your needs, drawing from the diverse offerings of our many carrier partners.
• Ongoing Service and Support: Our relationship doesn’t end when you purchase a policy. We’re here to assist with policy service, answer questions, and conduct periodic reviews to ensure your coverage continues to align with your life circumstances and financial goals, which is especially important for actively managed policies like VUL.

Choosing Insurance By Heroes means partnering with a team that understands service and prioritizes your financial well-being. We use our independence to shop the market effectively, ensuring you get the right advice and the right policy, tailored specifically for you.

Alternatives to Variable Universal Life Insurance

Variable Universal Life is just one option on the life insurance spectrum. If the risks or complexity seem too high, or if your goals are different, several alternatives might be a better fit. Understanding these helps put VUL in context:

• Term Life Insurance:
  • What it is: Provides pure death benefit protection for a specific period (term), typically 10, 15, 20, or 30 years. No cash value component.
  • Pros: Significantly lower premiums than permanent insurance for the same death benefit amount, simple to understand.
  • Cons: Coverage expires at the end of the term (though some policies offer conversion options), provides no cash value or investment growth.
  • Best for: Covering temporary needs like income replacement during working years, mortgage protection, or covering childrens’ college costs. Often the most cost-effective way to get a large amount of coverage.
• Whole Life Insurance:
  • What it is: Permanent insurance with guaranteed premiums, a guaranteed death benefit, and guaranteed cash value growth (based on rates declared by the insurer, plus potential dividends from mutual insurers).
  • Pros: Guarantees provide predictability and safety, simpler than VUL, cash value grows tax-deferred.
  • Cons: Premiums are significantly higher than Term Life, cash value growth is typically conservative, less flexibility than UL or VUL.
  • Best for: Individuals seeking lifelong coverage with absolute guarantees and minimal risk, often used for estate planning or final expense coverage.
• Universal Life (UL) Insurance (Standard/Guaranteed):
  • What it is: Permanent insurance offering flexibility in premiums and death benefits (like VUL). Cash value grows based on interest rates declared by the insurance company, which may change over time but usually have a minimum guarantee (e.g., 1-2%).
  • Pros: More flexible than Whole Life, less market risk than VUL, cash value grows tax-deferred. Guaranteed UL (GUL) focuses on providing a guaranteed death benefit for life with minimal cash value accumulation, often at a lower cost than traditional UL or Whole Life.
  • Cons: Cash value growth depends on insurer-declared rates (can be low in low-interest environments), requires monitoring to ensure sufficient funding, complexity is higher than Term or Whole Life.
  • Best for: Individuals seeking permanent coverage with premium flexibility but lower risk and complexity than VUL. GUL is often used for affordable guaranteed lifelong protection.
• Indexed Universal Life (IUL) Insurance:
  • What it is: A type of UL where cash value growth is linked to the performance of a stock market index (like the S&P 500), but with downside protection (often a 0% floor, meaning your credited interest won’t be negative) and upside limits (caps or participation rates that limit the maximum interest credited).
  • Pros: Potential for higher growth than standard UL or Whole Life, but with less direct market risk than VUL due to the floor. Tax-deferred growth, flexibility.
  • Cons: More complex than standard UL or Whole Life, growth potential is capped, performance can be affected by changing cap/participation rates set by the insurer, fees can still be significant.
  • Best for: Individuals seeking growth potential tied to the market but wanting downside protection, comfortable with moderate complexity and potential limits on upside gains.

Determining the truly “best” life insurance strategy involves comparing not just different VUL policies, but also considering if VUL itself is the right *type* of policy for you compared to these alternatives. As an independent agency, Insurance By Heroes is uniquely positioned to provide this comprehensive comparison, drawing options and quotes from across our network of dozens of carriers to find the solution that best aligns with your protection needs, budget, and risk profile.

Making an Informed Decision: Is VUL Right for You?

Variable Universal Life insurance can be a powerful financial tool for the right person, offering lifelong protection combined with the potential for significant market-driven cash value growth and tax advantages. However, it’s not a universally suitable product.

Before deciding if VUL is the “best” option for you, honestly assess your situation:

• Risk Tolerance: Are you comfortable with the fact that your cash value and potentially your death benefit could decrease due to poor market performance?
• Investment Understanding: Do you have the time and willingness to learn about investment sub-accounts and monitor their performance, or will you rely on an advisor?
• Need for Flexibility vs. Guarantees: How important is premium flexibility compared to the certainty of guaranteed premiums and cash value growth found in Whole Life?
• Fee Sensitivity: Are you prepared for the potentially higher internal costs associated with VUL compared to other policy types, and understand how they impact net returns?
• Time Horizon: Are you investing for the very long term (decades)?

Remember, the “best variable life insurance policy” isn’t found on a generic list online. It’s the policy from a reputable carrier whose specific features, investment options, and cost structure align perfectly with *your* individual circumstances and financial plan, and only after carefully considering if VUL is even the right *type* of insurance compared to alternatives like Term, Whole Life, UL, or IUL.

Making this determination requires careful consideration and, ideally, guidance from professionals who prioritize your interests. The complexity of VUL makes expert advice not just helpful, but essential.

Get Your Personalized Variable Life Insurance Quote Today

Variable Universal Life insurance offers a unique combination of lifelong protection and market-linked growth potential, but it comes with significant risks and complexities that demand careful evaluation. It’s crucial to determine if its structure aligns with your financial goals and tolerance for risk.

Don’t navigate this complex decision alone. The dedicated team at Insurance By Heroes is here to help. Founded by a former first responder and military spouse, and staffed by professionals with backgrounds in public service, our commitment is to serve *you* with integrity and transparency. As a fully independent agency, we have the freedom to shop the market across dozens of top-rated insurance carriers. This allows us to compare various VUL policies – analyzing their features, fees, and investment options – alongside other types of life insurance to find the solution that truly fits your unique needs, budget, and risk profile.

Let us put our commitment to service and our market access to work for you. Take the first step towards securing the right protection for your future. Fill out the secure quote form on this page now for a no-obligation consultation. We’ll provide a personalized comparison and help you understand your options clearly, so you can make an informed decision with confidence.