VUL Phobia. Is it Really That Bad?

There are still many people who are not into investing yet they have huge amounts of money stuck in their savings accounts. They are capable yet one of the biggest reasons why most of them don't is their scepticism of the investment processes and having very little trust to financial advisors/agents. Unfortunately for some financial advocates, they think they are helping these people to decide better by telling them to stay away from an investment product by merely giving this subjective reason of "greed" of some agents.

Sure, there are really those sales people who are more concerned after the cuts and commissions from their client's moolah than into helping them. But we cannot generalize advisors/agents based on the product they sell. And it does not follow that if one is pushing for a product that you don't agree with, then he's just after the client's money. Every financial case is different and so with each of the solution and it could be something different from what you think is applicable with your case. It is just sad that even some of those seasoned "gurus" give this type of advise simply because they don't like one product nor it does not suit their ways which in turn scares away inexperienced potential investors from more possible options they can choose from.

One of the usual victims of such "hate" is the VUL or Variable Universal Life. For those who doesn't have an idea yet of what VUL is, it is basically a type of product that combines a whole life insurance and an investment facility into one. "VUL is too expensive", they say. "It's for the lazy people", they say. "It's for the agent's commissions only", they say. I will tell you right away that there's a bit of truth about these things, BUT... these TRUTHS could actually work in your favor as an investor.


1. First, by saying it's "too expensive", what is it that makes other people say that it is? You can only say that one thing is expensive if you have a comparison. Upon reading observations of some finance advisors who believe that VUL is expensive, they are wrongly comparing it like apples to oranges with other pure investment type of products. And if they understand what they are doing, then that's dishonesty. But there are some who makes a better case in comparing VUL from investing in Mutual Funds/UITF plus getting a term insurance policy separately and proving that the latter is cheaper. There might be cases like that. Though basic economics knowledge will tell you that maintenance charges of a single product compared to two will always be cheaper. And that's the case with VUL versus UITF/MF + Term Insurance nowadays. There was a period that it was not. However due to continuous researches of financial companies and the high level of competitions, companies offering VUL improved a lot on this part. That would be more true if you compare offering of each product within the same company who provides them. Don't just take my words for it. You can have an advisor/agent make a quote for you on each of these products they offer and let them compare the charges and the projected amount you can earn in a certain period considering all factors (age, face amount, length of years to invest, fund options, etc) are equal.

2. Some will disagree on the whole life insurance part of VUL and will tell others that it's always better to buy a term insurance. Let's take a specific scenario. If you are young,buying a 10 yr term life insurance and would be cheaper than the charges you will pay in 10 years for a whole life insurance combined with a VUL. But after 10 yrs, if you want to renew your insurance, you have to undergo with another approval and application process. There's a big possibility that your health condition will change at that time and there's a bigger risk that you will not be approved because of it. And even if you get approved for a renewal, then guess what, your charges will be higher than what you paid for your first term. Unlike when you have it integrated with a VUL, you will undergo with just a one time approval process for an insurance coverage that you will have for your entire life until maturity and charges get even lower as you age. The fact is, there are even many VUL products now where its insurance charges are cheaper compared to what you would pay for with a separate term insurance policy.  There was a time that VUL charges were higher than getting a separate insurance policy + MF/UITF (or what they call BTID meaning Buy Term, Invest the Difference) but it was so long ago and it did not last that way since people nowadays are smarter in choosing the right investment product for them. But it seems some people were not able to move on from that period and are stuck with the idea of what the VUL looked like on its initial offering which in turn blinded their opinion about it.

3. And there will be those who will argue on why would you sell a VUL when the client only wants a pure investment. That's another case. One would ask why would you offer someone who has an insurance already to buy another one? You will not unless he needs it as he thinks that his first one's coverage isn't enough. And also, if one doesn't have an insurance yet and he wants to start an investment, a good financial advisor would encourage that person to buy an insurance first for reasons that all advisors and seasoned investors must already know. And offering him a VUL to have it both at once can be a good option. 

4.  Is laziness a reason for buying VUL? Yes and No. Yes since you read the reasons above on why it's better to choose getting a VUL than having to deal with twice the process for separate insurance and investment. That's one good reason to be lazy. But it can also be that you are NOT lazy but a hard working person that doesn't have much time in your hands and that you could benefit more in getting a 2 in 1 product. But of course, you have to consider your needs first before starting with anything.

5. Are agents selling you VUL solely because of the commissions they will get? It is possible. And it is NOT limited to VUL agents. There will always be sales people who will try to manipulate others to buy the things they don't need. Therefore, you must not use this reason on not getting a VUL since it is not the product's fault that we have those unethical sales people. You must decide what investment product you need based on your knowledge of your own situation, not on what other people think about you or to the others. Besides, do you really think those who are selling term insurances, UITFs or MFs are doing it for free?

6. You can maximize benefits of VUL only if you die early.  True. Very true. As investors, we all know that every type of investment is a risk. We understand that time is our friend which helps us minimize the risk. But do we always have time on our side. Maybe. Maybe not. And what if you are a young parent with small kids or a young professional who is the breadwinner of your family? What if you only have invested for a year and let's say it has Php 100,000.00 cash value in it, and then something happens and you die? I hope that this could even cover the whole funeral service fee. Then after that, who will bring the food on the plates of your loved ones you leave behind? Every investment is a gamble. So is life. And I don't think it's bad enough to gamble by at least starting with Php 3000 per month and pay it out after 1 quarter for a VUL and be able to protect yourself with a Php 1,000,000.00 insurance value right away just in case the inevitable happens. But then, if you live long enough, you just have to make sure that you choose the best fund option so you can enjoy the fruits of this "gamble" during your old age.

You must also keep in mind that an investment product (MF, UITF, VUL, etc) which are offered by each company although similar are to be treated as different animals by themselves. There are different paying terms, charges, funds options, fund managements, etc.  Therefore, there will always be the worst among them in terms of charges, management, processes, etc. But in any case, the worst in its field will not defeat the purpose of what a specific investment product would provide to a client's needs. The best way is choosing the product that suits your need, then finding the company that gives the best offering for that kind of investment. So for those who are just beginning to research about the best type of investment to start from, please, do yourselves a favor. Hold on to your emotions and let it not be swayed by a strong opinion against persons. Give yourselves the chance to look at all the options logically before finally deciding what's best for you. And let me be the one to tell you that VUL will NOT be always the best choice for you, but then, you will not know which one is unless you unbiasedly read, listen or ask.

That Investment is Non-Investment

The "Wolf of Wall Street", Jordan Belfort, was blatant in saying that people mostly in the Asian region base their decisions on emotional reasons rather than the logical ones. We first decide based on what we feel then we try to convince ourselves and others by finding logic on that choice we make.

Same thing with our finance management. You could meet a lot of people "investing" on different things. It could be on expensive gadgets, new real estate properties, expensive shoes or clothes, new cars, etc. At a quick glance, you can say that these are all but expenses. But try to ask the person who bought them. For sure, they have a list of reasons why they purchased these things and why they consider these as investments. It really depends on their circumstances and what they are saying could be true.

I hope they earn dividends

But some people, when you ask if other than these "investments" if they have also put money in the stock market, mutual funds, insurance, VUL, UITF or heck even on a savings account for their emergency fund, a lot of them will answer "NO". And they will have reasons for not doing so like saying it's not their priority right now. Shoes, gadgets, clothes over real investments? Sure. It's our freedom to use our hard earned money in any way we want to. But fooling ourselves to believe that what we are doing is "investing" is what could hurt us later in our lives. Are you like one of these people? I hope it will never be too late for us to realize and learn what a real investment is from what is not.

Financial Freedom Is Not The End Of It

The reason why a lot of people can't reach financial freedom they are dreaming of is because of their wrong concept of it. A lot of us think that it is about us having money to buy all the things we want. That feeling that "we made it". This is partially true but the harsh reality is most of us won't be able to reach that point.

The question that you must be asking yourself first is why do you want to have that financial freedom? Is it about the money, the cars, the big houses, the gadgets, jewelries, travels? Or is it about how you could get more time doing things you like and spending more moments with those you love? The usual reason why we can't do the latter is because of the idea that we are trapped in our daily duties to earn for our primary necessities. And thinking that to earn more, you work harder and longer times. Then to reward yourself, you buy things that you don't really need but which you think you deserve for all the hard work you have done. Fair enough. But the danger on this one is on that mentality that financial freedom equates to material things. That's probably the reason why most people who get scammed easily is swayed by the promise of luxurious things that he can buy upon joining them.

Fact is you don't really need a drastic change on your money status to achieve financial freedom. A simple change in mindset towards your priority management, starting small in your savings and investment, a little review and of your current situation and looking at all the other options will get you a long way.

Live With The Risk

There is always risk in everything. Not one outcome is 100% sure. Same goes in all types of investment. One must accept that risk is always present no matter how knowledgeable a person is or how stable a business looks like. Acknowledging this fact is the first step in succeeding or avoiding total failure. The next one is is to create a backup plan. And the third is to create another backup plan. And so on. Risk will always be there and we need to learn how to live with it and not paralyzed by it. The only sure risk of failure happening is when you don't do anything at all.

Do You Act On Love?

Love is not just a feeling. Love is an action word. Show it. Act on it. Do it. Like they say, put your money where your mouth is. 

Beating Inflation Black and Blue

It feels bad when you lose money. What’s worse is when you are not aware that you are losing some of it. And what's harder to realize here is the fact that you can't fight something you do not know about.  Majority of Filipinos lose money without even noticing it. They are sleeping soundly at night while their money is kept in their savings account thinking that everything is safe only to find out later that they already lost significant value without even them touching their hard earned moolah. The culprit is sneaky. It will hurt you without seeing how. And his name is INFLATION.

In the 90s, your 500 pesos can buy you a bag of goods and several kilos of rice from the grocery store. But now, you can just hand carry what you purchase with that amount. That’s inflation in action. It is what’s happening when the buying power of your money decreases by time affected by several factors of the economy. And most of the time, inflation beats the interest given by banks on your savings account. Meaning, if you don’t do anything with the money you keep in your bank accounts, you’re assured to lose money in the long run.

If you think that sitting on your savings account is a smart thing, then think again. Savings account is good for the sole reason that it is where you can put your contingency and emergency funds being the most liquid type of investment vehicle. Liquid means your money is accessible and ready for the taking any time the need to use it arises. So having a savings account is a necessity. But if you want to grow your financial wealth, putting all your money in it won’t help you that much. It might look less risky but the truth is it’s the surest way of losing your money without doing anything due to inflation. 

For us to understand it better, let's put in some numbers. 

The inflation rate in the Philippines as of this writing is 2.3%. Meaning, that's how much the value of money is lessened. How about the deposit rates? It's around 1 to 1.2%. At a glance, it's easy to see that you are losing your money to inflation compared to what your money earns in a savings account. So to make your money earn, you have to beat the inflation rate with a higher interest rate. 

There are finance companies or banks that provide options to invest part of your savings to other funds that can give you possible higher return rates than your usual savings interest (i.e. UITFs, EIPs, Bonds).  Though most have lock in period where you will be charged if take out your money earlier than the contract. There are also minimum amount for the initial investment on some of them. You can check it out at the banks, ask their employees, grab some leaflets or go to their websites to see your options.

Then there are also Mutual Funds like what we have with Sun Life Financial where you can start investing for as low as 5000 pesos and can add a subsequent minimum of 1000 pesos to your fund any time. You will also be able to choose the fund on where your money will be invested depending on your risk appetite. Then our professional fund managers will be the one taking care of it's growth. And you can pull out your money whenever you want it. 

And there are many other types of investment you can look at. What’s important now is you understand that inflation is a huge consideration when planning your finances and investments. You can’t ignore it because it is real and it will hurt you whether you are aware of its existence or not. No one can avoid it. But the good news is anyone, with the proper knowledge, can definitely beat inflation black and blue.

Happiness Value of Money

People often say that money cannot buy you happiness. There is much truth to that. Undeniably though, money can purchase the important things for your loved ones, for other people and for yourself. It is more about the value it can bring you like putting food on the table, having to spend more time with the people you care for, providing security for your loved ones in terms of health and other basic needs and having the opportunity to share with others. 

It's not money per se that will bring happiness to your life. But trust me. Losing lots of it can make you feel miserable. It’s always easy to dismiss the value of money until you experience hitting rock bottom. It's always more fun to be the giver than the receiver. But of course, giving is not always in monetary terms. But a lot of time, it is. And still, the value you are giving off is not the money itself but your effort exerted in acquiring it.

Earn smart, spend wise and always be a blessing for others.