If you’re a risk taker interested in not only protecting your family’s lifestyle if they lose your income but also want to build on that income and enjoy it while you’re still alive, there’s a way to do both. You do it through a Variable Universal Life Insurance policy, aka a VUL.

What Is Variable Universal Life Insurance?

It’s a type of Universal Life Insurance that offers the benefits you’d find in a Whole Life policy with the flexibility a Universal Life Insurance policy offers.

Whole Life Benefits + Universal Life Flexibility + Choice = Variable Life

Whole Life Insurance provides lifetime coverage and built-in savings by building cash value off the interest from the insurance company’s investments. You make regularly scheduled payments at a locked-in rate and the company invests what you put into your policy however they wish.

They control how it’s invested. But because they’re assuming the risk, your cash value growth is guaranteed.

Universal Life Insurance also provides lifetime coverage and builds cash value. But it also offers adjustable premiums so you decide how you’ll pay your premiums and death benefits.

However, with more control comes more risk. While the insurance company still decides how to invest your cash value, you assume the performance risk.

This means you need to monitor your payments. If you lapse, you lose your death benefit and may owe more premiums to cover the administrative costs the insurance company depends on your premium to cover.

Variable Universal Life Insurance does all of the above but allows you to control how you invest your cash value. It’s riskier than the other two but builds wealth quicker than they do.

How Variable Universal Life Insurance Works

A Variable Life policy works a lot like a mutual fund. You have an array of investment choices in which to invest your cash value. You have your choice of stocks and bonds, ETFs, mutual funds, and a money market option.

However, your premium is handled differently. Part of your premium goes into a subaccount from which you manage your investments. One premium pays for your life insurance policy to protect your family, the other is invested into this subaccount to build wealth faster.

Your Variable Life account is tax-deferred and you can make tax-free withdrawals from it.

But remember, because you’re in the driver’s seat you assume all the risk. If the market underperforms, you miss a payment or you don’t pay back what you borrowed from the policy, you decrease or lose your death benefit altogether and may end up paying the insurance company to cover not only your policy’s administrative fees but also your subaccount’s management fees on top of that.

VUL requires more oversight than Universal. It depends on a variable market. It isn’t for everyone. It’s expensive and it’s risky. But if you’re willing to take on the risks, there’s a good chance you’ll reap some very lucrative benefits.

Index Universal Life (IUL) is a type of Universal Life insurance policy that, like whole life, provides lifetime coverage and builds cash value you can borrow against or reinvest if you keep up with your premium payments. And like other flexible Universal Life policies such as Variable Universal Life Insurance, it allows you to adjust your premiums and your death benefits to fit your needs.

How Index Universal Life Insurance Works

What sets Index Universal from Variable Universal is how its cash value is invested.

Unlike Variable Universal, Index  Life Insurance is tied to a stock market index such as the S&P 500. Your cash value grows along with the stock market but you’re protected against losses because it also relies on steady earned interest. Variable Universal Life Insurance has no safety net.

Just like Variable Universal, a portion of your premium goes to your insurance policy and the insurance company places the remainder in an index account. Its added fees, expense charges and administrative expenses make it more expensive than whole life.

You can borrow against your cash value, reinvest it, use it to pay your premiums, or withdraw it. If you borrow against it, the insurance company charges interest. And you must pay it back in full including the interest or what you owe will cut into your death benefit. If you withdraw it, the IRS views it as regular income.

Index Universal Life Insurance Pros and Cons

Obviously, the biggest advantage to having any life insurance policy is the ability to provide lifetime coverage for your family. But like anything in life, Index Universal Life Insurance has its pros and its cons.

Pro: It can build wealth quickly.

Con: It’s riskier than other types of permanent life insurance (although less risky than Variable Universal).

Pro: It provides greater flexibility allowing you to build coverage that fits your financial needs and goals.

Con: There are more fees, charges and expenses to pay.

Pro: Cash value relies on earned interest as well as stock performance.

Con: Some life insurance companies place a cap on returns.

Pro: It won’t decrease your Social Security benefits.

Con: The premiums are higher for older policyholders.

An Index Universal policy is probably a good fit for a moderate risk taker. The financial benefits can be much higher than any death benefit alone.

Online shopping has made everything, including buying life insurance, easier. You go online to find an instant quote for life insurance, you do a little browsing, and click on a tantalizing title promising it’s the “best place to get life insurance quotes.”

So you click.

The popup menu asks about your gender and date of birth. No problem, every insurance company needs to know that. Men and women have different life spans (men’s are shorter) and older people have higher mortality rates. This is standard information.

Some will ask if you smoke or not. Makes sense. Your health is part of the standard underwriting equation. And a few will ask about the state you live in because different states have different regulations.

But then it can get a bit more…invasive. Which isn’t necessarily a problem except that you’re required to answer every question before you get carrier options and quotes.

Let’s look at some companies and the questions they ask.

PolicyGenius

Before providing a list of carriers and a quote, PolicyGenius will ask questions about your employment (including the hours you work), your educational level and annual income, and your driving record.

Then you get the information you seek.

SelectQuote

SelectQuote asks some of the same questions as those listed in the previous section but will also inquire about any risky hobbies you may have, like skydiving and rock climbing.

They will then ask for your email and home address before they give you the quote. And we all know that’s so they can keep bugging you about buying from them long after you’ve moved on.

Haven Life

Before they ask you any questions, Haven Life asks you to create an account before they give you any details about what they offer.

Ladder Life

Now, Ladder Life wants to know everything but the name of your dog, including annual income, your children, your mortgage, risky hobbies, travel plans, drug usage (including marijuana), criminal history, driving record, weight change, how long it’s been since you’ve visited your doctor, your medications, any surgeries you’ve had, HIV status and will not proceed until you’ve given them your address.

PolicyWand

PolicyWand will ask what state you live in (which, as mentioned above, is because different states require different regulations. You don’t want a quote from a carrier who it turns out can’t do business with you). They will also ask about your gender and date of birth, your smoking habits and your general, self-rated health status, how much coverage you want and for how long you need it.

That’s it. You immediately get quotes from a host of companies. Actual quotes. Not a range of quotes. Actual quotes.

Now, it can be argued that the more information a life insurance company collects up front, the better the carrier match they’ll make. However, the fact is that asking so many questions up front can pigeonhole you into accepting an insurance policy based on what they think you need, rather than allowing you to decide what you need.

In short, asking so many questions before giving you quotes prevents you from seeing all the options open to you. And you’ve given them more information than you may feel comfortable giving in the process.

It pays to shop around for the best life insurance quotes online. But how much are you willing to give away to do it?

You may already know that permanent life insurance policies like whole life accumulate cash value. What you may not know is that you can increase that cash value quicker with a Paid Up Additional (PUA) rider.

Life whole life, a PUA rider is a type of guaranteed permanent life insurance you can add to a base whole life policy. A PUA accumulates cash value faster and increases your death benefit more than the base policy alone can. Dividends and guaranteed interest fuel its growth.

How a PUA Works to Enhance Your Whole Life Insurance Cash Value

You contribute funds to the PUA rider to pay off your policy premiums. Once the PUA meets the initial death benefit, the benefit amount continues to grow as part of your base policy.

All life insurance companies require a minimum PUA annual contribution amount. However, some life insurance companies allow you to contribute as much as you wish to accelerate its annual growth; others have an annual cap. And you must purchase the rider at the same time as the whole life policy.

Once you pay off your policy, the PUA dividends continue to compound. You can borrow against your policy to purchase a home or other investment, use the cash value to increase your coverage as you age without medical underwriting, or surrender the accumulated cash value for withdrawal tax-free.

The Benefits

To recap, the biggest benefit a PUA offers is its ability to build additional cash value. It also:

• accelerates the rate at which your whole life policy accumulates cash value
• increases your death benefit
• allows you to control how much you want to contribute and how often; thus, giving you control over growth rate (although there is an annual minimum)
• is guaranteed to grow through compounding dividends and interest
• is less risky than other wealth-building strategies
• eliminates worry about your payment schedule if you elect to have the cash value pay your premiums

Once your accumulated premium payments match your death benefit, you can:

• borrow against your policy to invest in a new home, education, etc.
• increase your whole life coverage without additional medical underwriting
• surrender the cash value you’ve accumulated and withdraw it tax free

The Downsides

A PUA is a rider only. You can’t purchase it as a stand-alone base policy. It must be attached to a whole life policy that pays dividends from the insurance company’s generated profits.

Older purchasers and those with health conditions will pay more and have less time to reap the benefits. That’s because the base policy carrying the PUA rider will start with a lower initial cash value and death benefit.

Despite its downsides, if used wisely, a PUA is an excellent wealth-building vehicle.

Shopping around for life insurance is about as fun as filing your taxes but it doesn’t have to feel like a tax audit.

All online insurance websites have a life insurance cost calculator to make getting a quote easier. You can do it on a laptop while watching the news.

But some life insurance companies make it damn hard to get to the quote.

Why All the Questions?

Your question is “How much coverage do I need?” Unfortunately, to answer your question we must ask you questions to gain context.

Vital contextual questions include the state you live in, for instance. Life insurance regulations vary from state to state, so it’s impossible to give you an accurate quote unless we know where you live.

Other fair questions include your gender, age, weight, and smoking habits. The older and heavier you are, the more you’ll pay. If you smoke, that’ll increase your premium, too. And males have a shorter life expectancy than females.

Can We Just Get to the Quotes?

But some questions are just too invasive for a “how can I help you” conversation. And most online life insurance sites ask for everything but the name of your cat before relinquishing a quote.

Here are some of the things they want to know before you ever see a popup with dollar signs and life insurance company names:

• Your employment. Yes, it’s fair to find out if you can pay the premiums. But what does that have to do with a life insurance quote? Some carriers also want to know how many hours you work.
• Your annual income. Again, a fair question. But why up front? If they’re weeding you out based on income, they’re not interested in helping you. They’re interested in finding out if they can make money off of you.
• Your mortgage. Another question to verify you can pay your premiums. But it’s more appropriate to ask it later.
• Your level of education. Why ask this? A person over the age of 18 with an eighth-grade education can qualify for life insurance.
• Your email address. We all know what that’s about.
• Your physical address – not just your state. Your house number and street name. If you give it, expect your physical mailbox to be full of enough offers to wallpaper your kitchen. And you never know who they’re selling it to.
• How many children you have. Beneficiaries are an important discussion. Again, more appropriately asked LATER.
• Travel plans. Yep. Travel plans.
• Other invasive but fair questions that should be asked later include your driving record, your drug use, the medications you’re taking, any surgeries you’ve had, the last time you visited your doctor, your HIV status and any changes in weight. Again, all questions that can be asked LATER. If at all.

The reason PolicyWand’s EZ calculator is so easy is that we ask for only five basic pieces of information:

1. the state you live in
2. your gender
3. your date of birth
4. your opinion on your general health
5. How much coverage you need

DIY Life Insurance

If a laundry list of questions scare you off, grab a pencil and paper. There are a couple of formulas you can use to calculate how much you need for yourself.

The easiest way to find out how much life insurance you need is to multiply your current salary by the number of years you think you’ll continue to work. If you’d like to give DIY a try, check out more formulas.

But it shouldn’t be that hard. All you want is a quote. All you want to know is “How much insurance do I need?”

The way you get the answer is up to you. You can do it with invasive questions, you can do it yourself, or you can do it the EZ way. PolicyWand’s way.

Experts say you need to buy enough life insurance to pay off your debt and mortgage and replace your income with a little padding built in for inflation.

Since people make varying amounts in income and carry varying amounts of debt, the minimum and maximum amount life insurance companies allow make for an interesting topic.

But before we discuss what the companies will or won’t allow, let’s look at how life insurance companies measure policies in terms of CPU, or Cost Per Unit.

One unit of coverage is $1,000. So a policy worth $1 million breaks down to $0.37 per unit. A policy on the lower end, like $100,000 breaks down to $.49. The more you buy, the less it costs per unit, and vice versa. As anyone in business knows, this makes bottom-line sense.

Before we get into the minimum and maximum, let’s state the average amount life insurance companies pay out. It hovers around $600,000 ($0.45 CPU).

Minimum Life Insurance Coverage

Term life insurance policies offer lower coverage amounts than premium ones like whole insurance. Although most life insurance companies’ lowest offer is $25,000, some do go as low as $10,000. These minimum-coverage policies don’t require any medical exam and pay out almost instantly.

Obviously, most families can’t sustain the cost of living on $10,000 or even $25,000, for very long. But minimum coverage policies do make sense for single people with no dependents, mortgage or debts.

Many singles have few obligations, so a $10,000 payout on a term-level insurance policy will cover the average cost of a funeral and spare a family from carrying that burden in addition to their grief over someone gone too soon.

Now, you can also buy a dividend-producing whole life insurance policy with lifetime coverage for as little as $10,000 as well. But you’ll be paying a lot more for a lot less in return.

Maximum Life Insurance Coverage

If you’re wondering if infinite life insurance coverage is possible, the answer is yes. But before you start shopping for online life insurance deals with those kinds of payouts, you need to know that most life insurance companies allow a maximum of 25 times your income. So you need a high-income stream and a lot of assets to afford that kind of expected payout. And you’ll have to back up your financial status with additional paperwork such as pay stubs and tax returns.

These higher coverage amounts come with permanent policies because they offer more fiduciary benefits to both you and your insurance company for a longer amount of time. Term life insurance policies have an expiration date of 30 years.

If after reading this you want to see where you fall on the maximum/minimum measurement scale, have a look at your income, standard of living debt, and current income. Then get on the computer to get an online insurance quote armed with the information you need to get the best life insurance for you and your family.

When you applied for your life insurance policy online, what you received was a quote. To obtain the actual policy, life insurance companies require a phone interview. And depending on how much life insurance you’re seeking, that may be all that’s required.

If you have spoken with one of PolicyWand’s noncommissioned agents, you know that they’re only there to answer questions pressure-free. Conversely, the person conducting your post-application interview is simply there to ask questions. Sometimes it’s the agent asking the questions. Other times it’s a third-party company representative.

Whoever is asking the questions, the main purpose of the life insurance phone interview is to verify that the information you provided on your application is true. It also ensures you buy only what you need and avoid buying what you don’t. The insurance company seeks to give you the best coverage and the fairest price.

What You Can Expect During a Life Insurance Interview

The interview takes no more than 30 minutes and at the end, you and the carrier will schedule a paramedical exam if one is required.

As long as you answer the questions accurately, the interview is easy. You’ll answer questions about your health, your job, your hobbies, and your finances.

Tips to Prepare for Your Life Insurance Phone Interview

Gather your documents ahead of time. Review the categorized lists below and make sure you either have the items on hand to refer to or can accurately answer questions about them.

Also, answer the questions as simply as possible. This keeps things running smoothly and saves you from answering more questions than you want to.

LEGAL DOCUMENTS

The insurance company will ask to verify your identity. So have the following items handy:

• your driver’s license
• your social security number
• your citizenship documentation, if applicable

WHY? The carrier needs to make sure it’s you and not someone else buying the policy. If the person buying the insurance is not the person to be insured, the carrier will interview both people to establish what’s called insurable interest.

LIFE INSURANCE HISTORY

If you’ve applied for life insurance before, have that paperwork ready. Or at least be able to answer questions about previous applications.

Why? The insurance carrier is required to verify that the information that you provided on this application matches information from previous ones. If there are discrepancies, the carrier wants to clarify them so you don’t get turned down for misrepresentations during the underwriting process.

MEDICAL HISTORY

Be prepared to provide information about:

• any diagnoses you’ve had in the past 10 years
• any surgeries you’ve had in the past 10 years
• your prescriptions
• your current physicians and their names, addresses, and phone numbers
• family health history, including:
  • diagnoses of major illnesses such as cancer, diabetes, or heart disease
  • the dates and causes of immediate family members’ death, if applicable
  • relatives you’ll be asked about include parents, siblings, and grandparents
• your current weight and any weight fluctuations you’ve experienced, plus or minus 10 pounds, in the past year

Why? They need to assess your health status to assess your risk. The healthier you are, the less you will pay in premiums. The less healthy you are, the higher your premium. Your conversation is protected under HIPAA laws.

HABITS

Smoking, drinking and drug use will raise your rate. Exercise and good habits lower it. Be prepared to answer questions about:

• how often you exercise, including team sports
• If you’ve quit drinking, smoking or using recreational drugs, make sure you share how many years it’s been since you quit. That may lower your premium rate.

HOBBIES

Not only do habits affect your insurance rate but hobbies can, too. Be ready to answer questions about any extreme sports you engage in such as car racing, rock climbing and the like.

Why? Your habits and hobbies also affect your risk. The riskier they are, the more you’ll pay in premiums.

FINANCES

Finances also factor into the risk assessment equation. Be prepared to answer questions about:

• the job you currently have
• the salary you currently earn
• your assets
• an estimate of your net worth
• how much debt you have

Why? The insurance company needs assurance that you can afford to pay the premiums for the foreseeable future. A steady job and strong assets make you a better candidate.

Although some carriers forgo the paramedical exam for policies with lower death benefit payouts, there’s no getting around the phone interview. It’s not only in the company’s best interest but yours as well. Preventing fraud allows insurance companies to provide you and their other clients with the best coverage at the fairest price.

That’s in everyone’s interest.

The History of Life Insurance: Who, What, Where, When & How

Unlike other bedrock institutions such as banking and the stock market, life insurance has always been an unflinchingly secure option to ensure financial security.

The flexibility term insurance provides young families, along with its generous payouts bought at affordable rates, make the unthinkable a bit less scary.

With their assets protected, term life policyholders can later convert their term policies to more lucrative dividend-producing ones and enjoy the even stronger financial benefits wealthy families have enjoyed for centuries.

How It All Started

Social responsibility is at the heart of what life insurance is all about.

A lot of historians say the concept of life insurance started in Ancient Rome around 600 BC. At the time, the Roman Empire’s burial rites were an expensive undertaking that included music, processions, intricate urns, and body preparation.

They believed that if someone wasn’t buried properly, the dead would come back to haunt them.

Many people couldn’t afford all this pomp, especially military members whose numbers fell on a regular basis. To remedy the situation, military leader Caius Marius ordered his soldiers to contribute to a fund to cover each fallen soldier’s burial costs.

Soon, everybody in the community was taking advantage of this early form of life insurance. Members contributed a copper or two into a “casket kitty” that enabled everyone to bury their dead with dignity.

So it seems the concept of life insurance started about 2,000 years ago.

The First Official Life Insurance Policy

On June 18, 1583, a Londoner named Richard Martin paid thirteen merchants thirty pounds each to finance a 400-pound payout should a man named William Gybbons die within the next year. No one seems to know why. But when Gybbons did die within 12 months, the merchants squabbled about what constituted a lunar year. Martin didn’t get the payout.

And guilds in the Middle Ages successfully shared life insurance policies that protected people working in dangerous trades like building and blacksmithing from financial loss due to accidental death and dismemberment.

The First Official Life Insurance Company

Two guys named William Talbot and Sir Thomas Allen got together in 1706 and created The Amicable Society for Perpetual Assurance Office, and most people agree that it’s the first known life insurance company.

How it worked: Each member between the ages of 12 and 55 made an annual payment for one to three shares. These “amicable contributions” were divided among the families of deceased members at the end of each year. An estimated 2,000 people joined the society.

Other life insurance enterprises started springing up. Shipping workers formed an association to protect their families, and venture capitalists financing trips to the New World took out insurance on their crews. Meetings among the groups took place at Lloyd’s Coffee House, which later became Lloyd’s of London.

More business led to unscrupulous misdeeds. So, in 1774, Great Britain passed the Life Assurance Act to protect the public from insurance agent corruption.

The First Official Actuary Tables

Although historians tell the story differently, the basic idea is that a couple of people are responsible for creating the actuary tables using mortality rates to determine premiums.

It started when actuaries started reviewing church records to determine average life spans. Not long after, a guy named James Dodson produced a formula using these rates to determine how much a policy was worth. In 1762, Edward Rowe Mores used these formulas in the Equitable Life Assurance Society he formed to sell policies.

History of Life Insurance in the U.S.

Life Insurance crossed over to the U.S. in the eighteenth century through the Presbyterian Synods in Philadelphia and NYC. The enterprise started out as a fire insurance company in 1735 but grew into the Corporation for Relief of Poor and Distressed Widows and Children of Presbyterian Ministers in 1759.

Interesting fact: Within the next century preachers would demonize life insurance—calling it gambling.

Later, the 1837 financial crisis ushered in a push toward owned share business structure. Life insurance companies began offering mutuals instead of raising their capital through stocks alone. This opened the way for big-name companies like New York Life, John Hancock, MassMutual, and MetLife to start business, and as we all know, they’re still in business today.

But it wasn’t long before insurer fraud necessitated state regulations to tamp it down. At the 1871 National Insurance Convention, a National Association of Insurance Commissioners was formed to protect policyholders. It continues to oversee the industry today.

A few years later, Prudential began protecting working-class families in Newark, New Jersey, through the Widows and Orphans Society, which allowed women to collect on a husband’s life insurance policy for the first time.

And while World War I was going on across the Atlantic, the life insurance industry thrived. Beginning in 1917, insurance companies sold 120 million policies over the next two decades. And then, following a fallow period during the Depression, life insurance purchases surged again post-World War II.

By the mid-1970s, more than 90% of married couples owned a policy. And today’s technology makes online buying possible and even easier to purchase.