VUL simply stands for Variable Universal Life. Last week I wrote a quick overview of how it works and you can find it here: How and Where To Invest Your Money
But the question is — should I invest my money in it?
We have friends, colleagues, and even relatives who are financial advisors offering this kind of investment.
Some financial mentors recommend it. But how do I know if this is the right investment for me?
I said before that I was once a Licensed Financial Advisor. In fact, if by chance you’ve met a good financial advisor; you’re in good hands!
On the other hand, others will trick you to put your money on it without informing you what are the advantages and disadvantages of this investment.
I also shared before that I stopped paying my VUL and withdrawn all the remaining accumulated cash value it has because I felt it wasn’t aligned with my goals.I think that I got tricked because when the time came that I asked if I could add an add-on for it (critical illness, disability, etc,) he asked me instead to buy a new policy.
And I don’t like to buy a new policy because I have other investment in mind that I would like to put my money in it.
That started my journey in increasing my financial knowledge and eventually led me to another investment strategy that fits me well — BTID (Buy Term Insurance, Invest the Difference).
But which should I choose? VUL or BTID?
Today I have a close friend of mine who is also a Licensed Financial Advisor wrote something about it.
Which is better: BTID or VUL?
By Jennifer Yang-Estil, Licensed Financial Adviser / Co-Founder of Beyond Building Wealth
First things, first. What are BTID and VUL?
Let’s get familiar with the terms first.
BTID is the acronym of Buy Term Invest The Difference. It’s a financial strategy that uses the concept of buying a Traditional Term Life Insurance and then investing the rest of your cash flow or budget in a separate investment product/vehicle.
VUL is the acronym of Variable Universal Life Insurance. VUL is a non-traditional life insurance product wherein it combines life insurance with mutual funds (a type of
It’s The Wrong Question
Going back to my point: the question whether “which from BTID or VUL is better” is wrong.
Why? Because BTID and VUL are both strategies that solve specific problems.
It’s the same as asking which is the better fruit, apples or oranges? Both fruits are great, but it’s your preference and purpose that’ll determine which is better for you. Like if you’re making apple strudels for your family’s dessert, then using oranges would be a bad idea,
Similarly asking is whether which is the better medicine between Paracetamol or Guaifenesin.
With this analogy in mind, neither which is the better medicine between Paracetamol and Guaifenesin. Both are effective as medicines, but with different purposes. Paracetamol treats fevers and pains, while as Guaifenesin treats coughs and used as an expectorant.
It’s the same with BTID and VUL.
Asking The Right Question
Now, the right question to ask is: What’s the best financial solution for my needs and goals?
Your financial needs and goals will then determine what financial strategies and solutions are best for you. And based on my experience, it is never the exact same solution and strategy for everyone.
Financial solutions should individualize, customize and specific based on what the person needs and based on what the financial assessment reveals. It is very similar to what physician’s do to their patients.
So to answer the right question, get in touch with your trusted financial adviser and have a complete financial assessment from them.
Your financial adviser should give you recommendations depending on what will be the result of your assessment and then work with you in building your financial plan and in achieving your milestones.
I’m saying this because not all financial advisers are client-centric but instead sales-centric. They play the sales agent role instead of the financial advisers’ role in guiding clients achieving breakthroughs and meeting the client’s needs.
As a Financial Adviser, I make it to a point that I make a complete Financial Assessment to every client that comes my way, and I also take into consideration their preferences, budget, and personality as an investor and as an individual before making any financial solutions and recommendations.
Characteristics of BTID and VUL
Now that we’re all on the same page, let’s look at the characteristics and specifications of BTID and VUL. Here’s a list for you to better grasp the similarity and difference between the two.
|Cost of Insurance||Low-cost traditional term insurance premium on the onset of application. Term insurance premiums increase in cost every 5 years||Higher cost of VUL insurance premium on the onset of application since insurance and investments are combined VUL premiums are constant and do not change from
the onset of application
|Duration of Protection||Short term protection of 5 years or 1 year (varies from insurance companies)||Long-term protection until age 88 or 100 (varies from insurance companies)|
|Renewability||Needs to be renewed every 5 years or annually (varies from insurance companies)||No need to renew VUL policy is on-going from
approval of policy until maturity age or until
premiums are still paid.
|Insurability||Protection/insurability is not guaranteed with Term Insurance since there are instances that your insurance company will require you to
undergo a medical exam once the renewal period of 5 years or 1 year is over.You may be denied insurance protection if you’re declared medically unfit, or a much
higher premium will be charged to your term
insurance based on the medical results.
|Protection/insurability is guaranteed until the stated age on your VUL insurance contact.|
|Convenience||You can pay Insurance premiums can via auto debit and bills payment online.
Investments are separate and there are no bills notification for you to add to your
You need to manually add/deposit to your investments for you to invest regularly.
|Insurance and investments are linked together thus both are paid and invested to regularly (via auto debit and bills payment online) in just
|Accessibility||Insurance can be monitored and checked regularly online (varies from insurance
companies). Investments are monitor separately via online or offline since it is a different product.
|Insurance and investments can be both monitor at the same online portal (varies from insurance companies)-
Financial Advisers can regularly monitor and
|Commitment & Discipline
|High commitment and discipline needed since you’ll handle and manage your
investments manually.No one will remind you of your due dates, insurance expirations dates nor give you market updates. It’s your money anyway, you have the total control of it.
|High commitment but low discipline since your Financial Adviser will manage your policy and portfolio for you.
Your Financial Adviser will remind you and notify you of your policy due dates and
|Fit Financial Needs||Short term insurance protection.
Manual managing of investments.
|Long-term insurance protection.
Clientele experience with your Financial Adviser handling your account and
|Fit to Personality Type||Disciplined and committed with a strong habit of saving and investing regularly||Newbies and are just getting the habit of saving and investing|
Is BTID or VUL better for me?
Now, that’s a better question. And all I can say is, it depends. Let’s talk about it and let me assess you financially to see which is better for you to achieve your financial milestones, goals, and needs.
For now, you can list your financial goals and needs to get you started. Click here to get started with your goals.
Either way, whichever you choose BTID or VUL is great. As long as you START NOW!
What’s most important is that you start in building your wealth, protection and roadmap as early as today, because in the long run your future self and your family will thank you for it.
Now to answer the question: Should I Invest in VUL?
It’s me again — Dhenn. My answer: It depends. For me, BTID works best, for others VUL works best. In my own personal experience and opinion, you will only buy VUL if you fall into these type of person:
1. You’re “too lazy” to look for better investments or you are a newbie.
2. You already have enough funds and stock investments and looking for secondary investment to protect those assets.
3. You want to help a friend who’s selling you that type of insurance.
Overall, one of the many reasons why I did not continue my VUL policy is this:
1. I want total control over my investments.
2. I learned that the first three years of the policy (depends on the company), most payments will go to insurance first and a small fraction of the investment which is reasonable as you also bought an insurance.
3. BTID just works best for me now.
By the way, Jen is offering free coaching and Financial Blueprint Session so you can better recommend the right financial strategy and product for you. Contact Jen below for an appointment if you want to avail the VUL.
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