Variable universal life insurance policies can be exactly what the financial doctor ordered for you!

A universal life insurance policy is one where the premiums paid by you each month are split into two parts. The first part of your premium goes to the cost of insurance charge. This amount is what it costs for the insurance company to give you the coverage in case of loss of life.

The second part of your monthly payment goes to what is called cash value. The cash value is like an investment and it earns interest. In universal life insurance policies, this cash value builds and can eventually mean that there is enough cash value in the policy for it to make the cost of insurance payments for you. In essence, you stop making life insurance premium payments because the policy has accumulated enough money within it to make those payments for you.

What's different about a variable universal life insurance policy is that they allow the cash value portion of your policy to be invested a little differently than universal life insurance policies may. Variable universal life insurance can have your cash value portion directed into more than one investment even. This is more like holding mutual funds than just a cash portion of an insurance policy.

This product may suit people who want that cash value portion of their policies to have the ability to earn greater income than it might have done in a regular cash value holding. This is because it may be invested in higher risk investments and the return may be greater.

Term life insurance has no cash value that is separate from the entire policy. Universal life insurance can have a portion that is cash value. Variable universal life insurance can have a portion that is cash value that is more flexible in its earning capacity.

The actual amount of flex that your cash value earnings have is regulated by the insurance and financial industries. For example it is usual that such a policy may only credit a certain percentage of the earnings made by the cash portion of the policy. The amount that can be lost out of this account if the value of the investment goes down may also be restricted. Usually the value of this cash portion of the account is set at the beginning of each year.

It is a good idea to really compare these points in variable universal life insurance products before deciding with your financial and insurance consultants which one fits your needs best. Risk tolerance assessments are always a good idea with this type of product, as with any product where you are investing in a marketplace that rises and falls. You will want to know what kind of market your cash value is being invested in and whether that fits into your comfort zone.

If the flexibility of the way the cash value portion of an insurance policy can be invested is important to you, then variable universal life insurance may be the product for you.