Why a VUL product is a good addition to your investment portfolio

MANILA, Philippines — We all want our money to work as hard as we do. Keeping it in a bank will allow you to earn interest but there are other ways to maximize the potential of your hard-earned cash.

Even if you are new to investing, you have probably already heard of the many instruments and ways to help potentially grow your money: stocks, bonds, buying and selling assets, etc. Adding a variable unit-linked (VUL) insurance to your portfolio may be an option you have yet to explore.

A VUL is first and foremost a life insurance product, which means that for as long as your policy is in force, you are covered in case of your untimely demise.

Your beneficiaries will receive a death benefit. When your insurance product is a VUL, a portion of the premiums that you pay is allocated to costs and administration fees and the balance amount gets invested in the fund that you’ve chosen. This is how a VUL insurance plan basically works.

If you already have investments in the financial market, your question might be: Will it be redundant to have an insurance product with VUL? The answer to this varies and what works for one person may not necessarily work for another.

Start off your decision by having an idea of what you’re really looking for and what your goals are. Streamline your thoughts by answering three Ws: what, who and when.

The what

With pure investments, you can opt for mutual funds or unit investment trust funds (UITF), which are similar investment offerings that pool money from willing individual and institutional investors in order to buy and sell stocks, bonds, money market securities and other assets.

They are offered by investment companies and are regulated by either the Securities and Exchange Commission for mutual funds or by the Bangko Sentral ng Pilipinas for UITFs. These are good options that require minimal engagement from the investor.

On the other hand, variable unit-linked insurance is an insurance plan with an investment component. They provide the insured with living, death or disability benefits, with part of the premium being invested in a fund for potential growth.

The caveat is that the investment portion, like all other investment instruments, will be affected by how the economy and the financial market perform. The good news is that the value of your life insurance coverage will remain intact no matter how the external forces play out.

Aside from knowing your options, it is also important to analyze what your financial goals are before deciding where to invest. Ask yourself why you want to start investing, what’s your risk appetite and how much money you are open to investing. Pin these details down first, before moving on to the other factors to consider.

The who

The next thing to consider is for whom your investment is. Think about who should benefit from it: Is it you or your dependents?

If your target is just to potentially grow your money, then a pure investment product can work for you best. These are very straightforward in the sense that your funds are invested and managed by a professional, allowing you to earn through either an increase in stock prices, dividends or interest paid out periodically.

But if at the same time you also want to provide a financial safety net for your loved ones in case of your untimely demise, then a VUL is worth considering, too. The investment component of VULs is a nice bonus, should the market fare well.

Have a clear picture in mind of the exact people who should benefit from your investment and decide accordingly.

The when

Time is of the essence when it comes to investments. Aside from knowing your investment horizon, consider as well if you have the time and interest to learn about how the market works.

There are options for those who intend to also invest their time in order to understand how investments work, as well as options for beginners who prefer to have their funds managed by professionals instead.

Whichever route you decide to take, just make sure that these are aligned with the timeline of your personal goals. When in doubt, financial experts can help you understand the ins and outs of investing.

To consult with an AXA financial advisor, visit axa.com.ph/appointments.