What Is The VUL Insurance Plan In The Philippines? Benefits, Costs, and Everything You Need to Know
Jonh Pril Bacus- Dec 5, 2024
- 6 min read
You might be curious why guaranteed income plans are considered the best insurance option if you're aiming for comprehensive coverage, while VUL plans are only briefly mentioned. The reason is straightforward—most insurance agents, or “Financial Advisors,” already promote VUL plans. 90% of advisors advertise VUL on social media, so why should I? My job is not to echo what’s already prevalent, but to offer clarity and factual insights. The true distinction isn’t the product itself—it’s HOW IT'S EXPLAINED and how it resonates with you as a potential client.
What You Should Know About VUL Insurance Plan In The Philippines
First, it’s important to clarify that VUL is primarily a protection plan. Although it includes investment features, its main function is life insurance. If you consider VUL as a means to surpass investment options such as stocks, mutual funds, or real estate, you’re misunderstanding its purpose. VUL offers protection first and foremost, not quick wealth growth. If you've heard differently, I suggest exploring other investment products.
The Features of Our VUL Insurance Plan In The Philippines
Like other VUL plans offered in the Philippines, our plan offers life insurance coverage and the chance to invest in local and international funds, which may help surpass inflation over time. VUL plans also offer optional riders, including Critical Illness Benefits, Hospital Income Benefits, Accidental Death Benefits, Personal Accident Benefits, and Waiver of Premium.
VUL sets itself apart with its flexible premium payment options. You can choose a payment plan for a minimum of 5 years, go for 10 years, or select regular payments (THE MOST AFFORDABLE VUL PAYMENT PLAN). Furthermore, unlike traditional life insurance, VUL provides loyalty incentives, such as the Loyalty Bonus, for consistently paying premiums beyond the minimum term. Additionally, when it's time to receive the benefits, they are TAX-FREE.
Understanding VUL Insurance Plan In The Philippines Costs
Every VUL plan comes with associated costs, and it’s crucial to understand them:
• Insurance Cost – This is the monthly amount deducted from your policy's account value to provide your life insurance coverage. It depends on factors like age, gender, and risk profile, and it rises as you age or if your health declines.
• Withdrawal Charges – These fees are incurred when you take money from your account balance, usually diminishing over the years and ending after the sixth year.
• Monthly Load – This refers to a minor administrative fee, usually about Php 100 each month.
• Fund Management Charges – Anticipate a management fee between 0.50% and 2.25% annually, which is subtracted from your allocated funds.
• Additional Charges – Fees are also applied for changing funds and adding to premiums.
These charges are standard for all VUL plans, but it's crucial to comprehend them to prevent any misunderstandings about the allocation of your funds.
The Real Value of VUL Insurance Plan In The Philippines
I understand if you're worried about the uncertain investment returns and fees associated with VUL. VUL is not intended to be a high-growth wealth accumulation instrument; rather, it offers flexible protection while allowing your funds the chance to grow over time. However, if aggressive wealth building is your main objective, you might want to consider direct investments in stocks, real estate, or other options.
However, VUL offers something that these other options lack: GUARANTEED PROTECTION. If something happens to you, your business, stocks, and real estate won't safeguard your family—but VUL will. That's an important distinction.
Understanding Basic Premium & Rider Premium in a VUL Insurance Plan
It's important to comprehend the allocation of your premium payments between the Basic Premium and the Rider Premium when investing in a VUL plan. This differentiation clarifies how much of your money is aimed at investment growth and how much enhances your protection.
Basic Premium: A Balance of Protection and Growth
The Basic Premium is the part of your overall premium allocated to your life insurance coverage and investment fund. This premium is divided between ensuring protection for your beneficiaries (in case of your death) and investing in funds that may increase in value over time. Consider it the cornerstone of your VUL plan, providing a mix of insurance protection and financial growth potential.
It's important to understand that, based on the amount of your life insurance coverage, a large part of your Basic Premium may be allocated to cover the insurance costs, with only a small fraction available for investment. For instance, if your VUL plan provides Php 1,000,000 in life insurance, approximately 80% of the Basic Premium might be used to sustain this coverage, leaving just 20% for investment growth.
If you aim to enhance investment growth, you might choose minimal life insurance coverage so that a greater portion of your Basic Premium can be allocated to your investment fund.
Rider Premium: Enhancing Your Protection
The Rider Premium covers the additional benefits you’ve chosen to include in your plan, enhancing the comprehensiveness of your protection. Common riders in a VUL plan include:
• Critical Illness Benefit
• Hospital Income Benefit
• Personal Accident Benefit
• Accidental Death Benefit
• Waiver of Premium
These riders offer customized coverage based on your needs and lifestyle, providing added financial security in case of unexpected events, whether it’s hospitalization or critical illness.
Example of Premium Breakdown
Let's illustrate this with an example. Imagine you apply for a VUL plan that includes rider benefits like Life Insurance, Critical Illness, Hospital Income, Personal Accident, and Accidental Death. Here's a potential breakdown of your monthly premium for a plan with a 10-year payment period:
Basic Premium: Php 1,500 (Life Insurance: Php 1,000,000)
-This portion covers both investment and life insurance, but as mentioned earlier, a large chunk (approximately 80%) may be directed to life insurance coverage, leaving 20% to grow in the investment fund.
Rider Premiums:
• Critical Illness Benefit: Php 2,000 (Critical Illness: Php 1,000,000)
• Hospital Income Benefit: Php 800 (Daily Allowance: Php 1,000)
• Personal Accident Benefit: Php 600 (Accident Benefit: Php 1,000,000)
• Accidental Death Benefit: Php 300 (Accidental Death Benefit: Php 1,000,000)
• Waiver of Premium: Php 300
Total Monthly Premium: Php 5,500 (payable for 10 years—Riders Only). The Basic Premium might need to be extended beyond 10 years because a smaller portion is directed to the investment fund.
The Php 3,000 Comprehensive VUL Insurance Plan Package in the Philippines
When I encounter advisors promoting VUL plans for as low as Php 3,000 monthly with “all-in” coverage—Php 1,000,000 Life Insurance Benefit, Php 1,000,000 Critical Illness Benefit, Php 1,000,000 Personal Accident Benefit, Php 1,000,000 Accidental Death Benefit, Php 1,000 Daily Hospital Allowance, and a Php 5,000,000 projected retirement fund at age 65—it raises concerns. Although I’m not familiar with the details of these plans, I can confidently state that they are most likely Regular Pay plans, meaning you pay premiums for life, and the growth projections may not be as realistic as they appear.
These packages offer an excellent solution for the general market, particularly if you're on a limited budget yet desire thorough protection. In such situations, these plans are a suitable choice. However, don't anticipate significant growth in your investment due to how this type of plan structures its protection and coverage.
Before You Apply for a VUL, Ask Yourself: "What Are My Goals?"
• Are you looking for affordable, all-encompassing protection and are willing to pay premiums for extended periods without anticipating significant returns? In that case, a VUL plan with an all-in-one approach might be ideal for you. It offers a balanced choice for the general population aiming for both protection and affordability.
• Are you looking for thorough protection with a preference for limited payment periods (only 5 or 10 years) while anticipating higher returns in the future? If so, a VUL may not be suitable as it might not offer the growth you desire. Instead, think about separating your investment and protection strategies to achieve better returns and more tailored coverage.
For this reason, I frequently suggest dividing your financial strategy into two separate approaches:
1. Pure Life Insurance – A plan that provides maximum protection for your family with minimal investment requirements.
2. VUL with Minimal Riders – For those prioritizing investment growth, choose a VUL plan that offers minimal life insurance coverage and includes fewer riders. This allows a larger portion of your Basic Premium to be allocated to your investment fund, enhancing growth potential over time.
Dividing your financial strategy in this manner allows you to benefit from both thorough protection and enhanced investment growth, without sacrificing either.
The Premium and Exclusive Customer Experience With Me
This strategy is specifically designed for high-income business owners and individuals because it aligns with the principles you apply in managing your business. Just as you wouldn't allocate excessive resources to one part of your business at the expense of another, you shouldn't take such risks with your financial future. My approach offers the best of both worlds—PROTECTION where it's necessary and GROWTH where it is most crucial.
Let's discuss how to organize your plan to support both your WEALTH PROTECTION and INVESTMENT GOALS. By working together, we can develop a balanced strategy that ensures your family's future security and positions you for financial success.
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