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Ask Geri: Can You Send Me a Sample VUL Computation?

Notice that DG’s quotes provide for higher death benefit for lower annual premium given that she is much younger than RCM. Also, the projected fund value by 65 y/o is much higher, in spite of lower premium (hence lower investment amount), since DG has more invested years before reaching 65 y/o, compared to RCM. This is simply time value of money and compounding at work.

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(Email messages from two different readers, via Ask Geri)

1. From RCM: It may have been providence that I stumbled upon your site. Been wanting to get myself a VUL. I already have 3 kids and I’m 35 years old. Hope you can send me a sample computation.

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2. From DG: Hi, I am planning to finally get a VUL after I finish some payables by November. I will be turning 28 years old by then. Hope you can send me updated computations. My budget per month is around PHP2K only. Will it suffice? Also, some more questions:

  • If I will pay my premium monthly, where can I pay?
  • What is the due date of monthly payments?
  • If I decide to increase my monthly premium, how to go about it?

 


Here’s the gist of my replies to them (of course I sent them more detailed replies):

What is VUL?

VUL means Variable Unit-Linked Insurance. The short explanation is:

You save a regular amount (monthly, quarterly, etc), fund managers invest it for you (based on the investment mix you want) and you may withdraw from it for whatever purpose. On top of this, you and your dependents are guaranteed an amount in case of your death, disability and/or critical illness. A more detailed explanation is available here.

Now the details will vary on the insurance provider you get, as well as the technicalities. But in general, as we grow older, insurance becomes more expensive because (again in general), the older we get, the more prone we are to death, disability and critical illnesses. So the trick is to invest in insurance as early as you can. In fact, it is better that you protect yourself first before exposing your hard-earned money to investment risks. See our Beginner’s Guide for details.

VUL is a hit among Filipinos because sadly, Juan would rather invest and risk their money rather than protect themselves first via insurance. Maybe because of the still not-good image we have of insurance, as most would associate insurance with pre-need plans (many of which failed in the country), which in actuality are very different. Here’s the distinction between unit-linked insurance and pre-need plans. In VUL, you get both protection and investments!

Sample Computations 

(Figures provided here are based on the provider I am affiliated with as part-time Financial Consultant):

For RCM (35 y/o),

Quote 1

  • Annual Premium: PHP29K (monthly equivalent of PHP2.4K)
  • Savings Period: 10 years (total cash out of PHP290K)
  • Death Benefit: PHP1M
  • Disability Benefit: PHP300K
  • Investment Mix: 50% Equity, 50% ProActive Fund
  • Projected Fund Value by 65 y/o: PHP1.2M

Quote 2

  • Annual Premium: PHP33K (monthly equivalent of PHP2.75K)
  • Savings Period: 10 years (total cash out of PHP330K)
  • Death Benefit: PHP750K
  • Disability Benefit: PHP200K
  • Critical Illness Benefit: PHP300K
  • Investment Mix: 50% Equity, 50% ProActive Fund
  • Projected Fund Value by 65 y/o: PHP1.3M

 

For DG (28 y/o)

Quote 1

  • Annual Premium: PHP24.5K (monthly equivalent of PHP2.04K)
  • Savings Period: 10 years (total cash out of PHP245K)
  • Death Benefit: PHP860K
  • Disability Benefit: PHP300K
  • Investment Mix: 50% Equity, 50% ProActive Fund
  • Projected Fund Value by 65 y/o: PHP2.5M
Quote 2

  • Annual Premium: PHP33K (monthly equivalent of PHP2.75K)
  • Savings Period: 10 years (total cash out of PHP330K)
  • Death Benefit: PHP820K
  • Disability Benefit: PHP300K
  • Critical Illness Benefit: PHP300K
  • Investment Mix: 50% Equity, 50% ProActive Fund
  • Projected Fund Value by 65 y/o: PHP3.2M
Notice that DG’s quotes provide for higher death benefit for lower annual premium given that she is much younger than RCM. Also, the projected fund value by 65 y/o is much higher, in spite of lower premium (hence lower investment amount), since DG has more invested years before reaching 65 y/o, compared to RCM. This is simply time value of money and compounding at work.
More FYI
It varies per insurance provider but for this particular sample, monthly premium is split into protection and investment portions for the first 2 years only. By year 3 onwards, 100% of the monthly premium goes to investments (fund value) which work like Mutual Funds / UITFs.
Monthly premium may be payable via auto-debit arrangement in major banks, auto-charge in major credit cards, or issuance of post-dated checks. Other frequencies available are quarterly, semi-annually and annually.
Due date depends on when the policy will be approved since this VUL plans still undergo evaluation.
Providers don’t easily allow increase in monthly premium at the middle of the savings period since your risk profile may have already changed by then. Before you can easily increase your premiums, you will have to be assessed again. Top Ups though are much easier in case you want to save a higher than usual amount from time to time only, and not from a particular point onwards.
Lastly, note that this is not a loan wherein you can pre-pay or preterminate in case you have extra money. This is a commitment to yourself and to the provider for you to save in the next 5, 7 10 or 15 years. If you prefer one-off payments, then consider a single premium VUL wherein you pay the full amount at the beginning. But such strategy will not take advantage of cost-averaging for your investments.
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About Geri (355 Articles)
Founder and main author. Husband, used-to-be-breadwinner, God-made multi-millionaire, employee, financial planner and adviser, investor, stocks trader, entrepreneur, agri-preneur, book author. Firm believer that all Pinoys deserve a richer life. Not a guru, but a forever student of the investments world, a work-in-progress.

7 Comments on Ask Geri: Can You Send Me a Sample VUL Computation?

  1. If you're just in Metro Manila area and is decided to start an investment that also offers protection, I'll be glad to meet with you in person to discuss further.

    Like

  2. Yes no need for medical. Actually all quotes above since death benefit is below 1M no need for medical. This is in general though. It might still change once you're talking to an actual agent. In my case it is no longer required for 99% of my clients. Just have some exceptional cases such as confined recently or overweight. 🙂

    Like

  3. Hi Sir,

    Thank you for this post.

    May ganun ganun pa pala ang mga insurance? ngaun ko lang po nalaman.

    Nagre-research po kasi ako kung ano maganda ko simulan na investment po, buti na lang nakita ko po yung blog nyu po.

    Question:
    So dun po sa quote kay RCM po since wala pong 1M di na po required ang medical?

    Like

  4. Hi. It seems you already have a background on insurance given your familiarity with the inconstestability clause.

    In general yes VUL is also covered by this clause since it still remains an insurance after all.

    Medical exam may be required for certain instances at the discretion of the insurance provider (like if you declared a sickness, if you seem to be hiding something, or asking for an unusually huge sum assured). But again in general some need not undergo medical exam, like the case for my clients, those with below 1M sum assured do not need to have medical exam.

    I'll keep you query in mind and hopefully write a more detailed post once I find the time. Thanks and keep on reading.

    Like

  5. Hi Geri!

    Sorry for this question, I just want to clarify something as regards to your sample computaions and in VUL in general.

    1. In applying for a VUL, would the Incontestability clause apply?
    2. In connection with the no.1 question, would there be a need for a strict medical check up before you can apply for a VUL?

    Hope you can find time to answer my questions, if you can make a new blog in expounding this topic I'll surely appreciate it.

    Thanks

    Like

  6. Thank you for appreciation. Hope I can be of service to you when the time comes.

    Like

  7. Thank you for sharing this sample VUL computations. I am hoping to have VUL investment early next year. 🙂

    Like

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