The post VUL vs Term Insurance: Analysis of Which is More Affordable appeared first on Armand Mañibo.
]]>It’s always been a debate of what life insurance is best, Variable Universal Life (VUL) or Term Insurance.
VUL is a life insurance that has an investment component. Meaning, a part of your payment goes to the charges(insurance charge, administrative charge, etc.) and the remaining amount goes to the investment portion. This type of plan has a payment term of one time, 5 years and 10 years. If the investment fund value is not enough to cover the charges, the insured need to pay for the charges to stay in force. You are covered until age 88.
Related Article: What is VUL?
On the other hand, term insurance has to be paid for life. It is more affordable compared to VUL in terms of the premium. However, the premium goes up every 5 years until the end of coverage which is 75.
I will be making a comparison between Sun Maxilink Prime (VUL) and Sun Safer Life 5YRCT (Term Insurance). I will be using a Face Amount of 1 million and a death benefit of 200% meaning it is a 2 Million Death Benefit. It is for a 25-year-old male, non-smoker.
Years of Coverage
For VUL, you are covered until age 88 and for Term, you are covered until age 75. Meaning if you outlive 75 then you are not insured anymore. For VUL. you will be given the whole fund value if you outlive the maturity period of 88.
Paying Period
You have to pay the premium of a VUL policy until the 10th year not unless the fund value is not enough to cover the charges anymore. For term insurance, you have to pay it until age 75.
Premiums
It is more affordable to pay for the premium of term insurance compared to VUL. That’s only if we will compute for the premiums within 10 years of VUL and 10 years of Prime. However, if we will compute for the sum of premiums for a VUL for 10 years and the premiums of Term until age 75. It is cheaper to get a VUL.
Maybe, it would be unfair to compare premiums since VUL has an investment component included. I decided to compare only the charges for the insurance of both plans. I added the charges of a VUL until age 88 and I got a total amount of Php 2,436,528. Meaning the charges is higher compared to the death benefit of 2,000,000. A difference of Php 436,528.
I did the same computation for term insurance. I added the premiums of the Term since it will technically be considered as the insurance charge also. The got a total amount of 1,144,350. It only means that it is 53% lower than the VUL. Refer to the figures below.
However, we are comparing the charges 63 years worth of charges for VUL. (88 maturity age)-(25 age of the insured)=63 years to a Term which only has 50 years worth of charges. (75 covered age)- (25 current age of the insured)=50 years. See figures above. It only means that there is no doubt that the charges of VUL are higher.
To make the comparison fair, I only computed the charges of the VUL until age 75 to make it the same as the covered age of Term. To my surprise, the total charges of VUL until age 75 is only Php. 838,855. It is 27% lower than the Term which is 1,144,350.
Conclusion
If you say Term is cheaper than VUL, then it will only apply to the current cost of both insurances if anything happens to you earlier than you expect. If you look at the long term cost of both insurance, VUL is cheaper.
If you don’t want to stress yourself paying for the insurance for life, go with VUL since you have an option to pay it 1, 5 or 10 years of premium. However, your investment fund value may not be enough to pay for the charges until you turn 88 if the investment did not turn out well. Another advantage of VUL is the flexibility of payment, it doesn’t lapse right away if you were not able to pay within the grace period.
In the battle between VUL and Term Insurance, both have the same advantage. It will always depend on what is your life and investment principle.
The post VUL vs Term Insurance: Analysis of Which is More Affordable appeared first on Armand Mañibo.
]]>The post What is Variable Universal Life (VUL)? appeared first on Armand Mañibo.
]]>You probably heard VUL before, especially from financial advisors of insurance companies. This is the most popular insurance policy since it has a unique benefit which is its investment component.
Variable Universal Life (VUL) is permanent life insurance where premiums (payment) you made will be used to pay for mortality and administrative cost and the remaining amount will be invested for potential growth.
It is variable since the investment performance varies on the market movement based on the type of funds you choose.
There are different fund allocation that you can choose from like bonds, money market, equity, index, and others.
ADVANTAGE OF VUL
Diversification is one of the strategies used by investors to reduce the effect of the volatility of the market. If you have stocks, mutual funds, crowdfunding, and business then VUL can be added to your asset portfolio and can give you protection.
The investment portion can be withdrawn. We all have plans and dreams that require a huge amount of money including kids education, dream house, and retirement. It will definitely cause us a lot of headaches getting a huge amount of money by the time comes. Getting a portion of our income and transferring it on a VUL as early as possible can help us achieve that goal easily.
Money works for us. We spend 8 hours of work and paid based on hours or days depending on the company. If we only have more than 24 hours a day, then we can work more than that. Working smart is now a trend, letting money works for you through investment can help you reduce time working for someone else.
DISADVANTAGE OF VUL
No one can predict what might happen with the economy, the same as the investment it may fluctuate anytime. Getting a VUL policy for 5 or 10 years paying period does not guarantee that you will only pay during that time. If your investment fund is not enough anymore to pay for the insurance then you are required to pay again to make sure your insurance is still in force.
Letting your money invested in VUL for a long period of time or not withdrawing funds can reduce the risk of lapsing. In that way, you can achieve a happy retirement or can transfer a huge amount of wealth to your family.
The post What is Variable Universal Life (VUL)? appeared first on Armand Mañibo.
]]>The post Do Opposite Personality Always Attracts appeared first on Armand Mañibo.
]]>In magnetism, opposite attracts and likes repel. This rule is applicable to science and relationship but not in personal development. Dealing who has the opposite belief, principles, religion, interest may cause conflict or influence one or the other.
We may sometimes feel incomplete because we feel we’re not enough. There are days when we feel that we should always get out of our comfort zone when we haven’t exhaust it yet. In the toughest days in our lives, we feel we need to change even our good character just to feel that we belong. The truth is, none of these makes any sense. We should love and accept who we are and other people will do the same towards us.
On the other hand, we should not hate other people for having different belief, principles or interest. It is always good to have an open mind and respect other people for who they are. We can always learn from other people’s experience which is something that we may apply in the future.
You are the average of the five people you spend your time with
Jim Rohn
In the book of Stephen R. Covey “ The 7 Habits of Highly Effective People”, he asked to imagine yourself going to your own funeral, what would you like your family, friends, co-workers, and community say about you and your life. Yes, it true, we should not live with other’s expectation but people will appreciate you for who are as long as you’re doing the right thing.
We all need people who will accept who we are and especially those people who have the same interest. When investments and personal development got my interest, I look like-minded people. I find a few in my workplace but I find a lot of them during seminars and training. Finding people who will support you, people who will boost your morale and people who will be happy for your success. We are not magnet because for us likes attracts.
The post Do Opposite Personality Always Attracts appeared first on Armand Mañibo.
]]>