Taxes & Insurance

If you’re shopping for life insurance, one option is a variable universal life (VUL) policy. You direct the premiums you pay among several investment accounts.

If you die while you have dependents, the policy can provide for your loved ones, free of income tax.


If you enjoy an extended retirement, a VUL can be tapped for ongoing tax-free income, via loans and withdrawals, as well as paying death benefits to your heirs.

If you accumulate substantial wealth, VUL proceeds can provide the liquidity to pay estate taxes.

If you need long-term care, some VUL policies have a convalescent care rider that can pre-pay death benefits, generating cash for nursing home or at-home care.

Moreover, in most states, life insurance cash value is not subject to creditors. Thus, VUL can offer a means of asset protection, too.

You might also consider buying such insurance with a long-term care feature, rather than buying an LTC insurance policy. Policies vary but you might, for example, be able to draw down the death benefit in advance, if you need long-term care.

Suppose you hold a life insurance policy with a $500,000 death benefit. At age 80, you need to go into a nursing home. The VUL policy might permit you to draw down $5,000 per month for your long-term care bills. For example, if you die after being there for three years and having withdrawn $180,000 from the policy, your beneficiaries would receive $320,000, not $500,000.