How It Works
Variable universal life insurance is a combination of variable life insurance and universal life insurance. Most notably, a variable universal life insurance policy allows you to change your premiums and death benefits (though this will change the coverage amount, of course). Buyers can also make one lump sum payment for their insurance.
A portion of the premium is invested in various instruments — bonds, mutual funds, etc. The value of those instruments changes daily (hence the name “variable universal life insurance policy”). If the value of these securities rises, insureds can sometimes apply those paper profits toward their premiums (which saves them money). Of course, if the investments don’t do well, the premium is still due. If there is enough cash value in the policy to cover the costs of the policy, the policy will stay in force (though some have a required premium for a set