Variable Universal Life Insurance

Each time you pay your premium, expenses are taken out and the remainder goes into your policy's cash value. Monthly expenses (including the cost of insurance) are deducted. Then your policy's cash value can be invested in a variety of ways. The performance of your investments is added or subtracted from your policy's cash value on a daily basis. Find out more about how VUL works.

Pros:

• VUL gives you lifelong protection for the people you love, along with premium and death benefit flexibility. It also lets you choose how your cash value is invested, so you could have the opportunity to build even more cash value (potentially leading to a higher death benefit) than you could with other permanent life insurance policies.

• Its fees are transparent. You can view the expenses and charges that your policy incurs, along with the performance of your investments on your annual policy statement.

• It can build cash value that will grow tax deferred and can be used for anything, anytime.¹

• It can be a way to reach other financial goals faster if you're willing to accept market risk.

• VUL offers a guaranteed death benefit for a certain period of time regardless of market performance as long as the required premiums are paid.

Cons:

• VUL might not be right for you if you're uncomfortable with market risk since your policy's cash value could fluctuate based on the performance of the underlying investment options you choose. It's also possible that your policy could lapse if your cash value is ever too low to cover policy costs (unless additional premium payments are made).

• VUL is appropriate for people who have a long time horizon before they'll need to access their policy's cash value.

• VUL appropriate for people who are interested in monitoring their policy performance.

Want to find out more? Connect with an advisor.

When you first get your policy, you can decide how long you want your death benefit to be guaranteed. As long as you continue to pay the premiums required for your death benefit guarantee, your policy will remain in force and the death benefit won't be subject to market ups and downs. Want to find out more? Connect with an advisor.

Since you have a wide variety of options for how your cash value is invested, your VUL policy has the potential to build even more cash value than it could with whole life insurance. On the other hand, it does have the potential to go down in value as well, since your cash value, and possibly your death benefit, are tied to the performance of those investments. So VUL could be right for you if you are comfortable with higher risk and have a long time horizon for the chance to see higher returns.

Unlike products that are taxed annually, VUL lets you build cash value tax deferred, giving you the opportunity for compound growth since the money you don't pay in taxes can continue to be invested. Keep in mind that the cost of insurance will still need to be paid out of your policy's cash value. Want to find out more? Connect with an advisor.

UL and VUL are structured in a similar way—the difference being how your cash value is invested. With UL, its growth is backed by the company's general account. For VUL, the policy's cash value is invested in options chosen by the policyowner, and the cash value (and possibly death benefit) are determined by how well the investments perform.

VL is similar to whole life in that it comes with a guaranteed death benefit and set premiums. But the policy's cash value growth and death benefit are not back by the company's general account. Instead, the policyowner chooses from a variety of investment options. VUL, on the other hand, the policy's cash value grows in much the same way, but also gives you flexibility in your premiums and death benefit amount. See our guide to life insurance.

VUL could work well for someone who wants the lifelong coverage you get with permanent life insurance, as well as the possibility of growing their cash value faster than they could with a whole life policy. It could also be right for someone who wants control over how their cash value is invested and the option to reallocate cash value over time, as well as someone who can take on market risk for the potential to see higher returns. Want to find out more? Connect with an advisor.

How they're similar:

• Both are types of permanent life insurance.

• Both build cash value.

How they're different:

• Whole life doesn't let you invest your policy's cash value, while universal life does.

• Whole life comes with a guaranteed death benefit, while universal life comes with a flexible death benefit.

• Whole life comes with set premiums, while universal life comes with flexible premiums.

See our guide to life insurance.

Northwestern Mutual offers 40 investment funds you can choose from when you own a Northwestern Mutual Select variable universal life policy. Each fund has its own focus, investment goals, and investment advisor(s). You'll have the option to separately select individual investment funds, or you can choose from a variety of pre-packaged solutions, each designed to work with a particular asset allocation model. These solutions can simplify the investment option selection process for you, since they come with a diversified mix of assets which could make sense for your risk tolerance and financial goals.

We also offer access to our Strength and Stability (SAS) account, which can reduce the amount of risk you take on. This unique feature gives you a fixed account option backed by our general account investment portfolio, allowing you to de-risk your VUL policy over time. You'll have the option to transfer 5-50% of your cash value (depending on how long you've owned your policy) to the SAS account, while the rest remains invested in the market. You might want to take advantage of the upside potential of investing more aggressively in the early years of your policy, and then minimize your risk over time or as things change later on in your life. Want to find out more? Connect with an advisor.