Something remarkable is happening in the life insurance world right now. While most insurance products grow slowly and steadily, variable universal life insurance just exploded—posting a 41% surge in the first quarter of 2025 compared to the same period last year. That's not a typo. We're talking about growth that has insurers scrambling to meet demand and financial advisors rethinking their recommendations.
If you've been shopping for life insurance, you've probably noticed the alphabet soup of options: term, whole life, universal life, indexed universal life, and now this VUL everyone's suddenly talking about. Here's what's driving this surge, what it means for your coverage options, and whether this trending product actually makes sense for your situation.
What's Behind the 41% Jump?
The numbers tell a compelling story. Variable universal life premiums hit $533 million in the first quarter of 2025 alone, and by the third quarter that number jumped to $751 million—a 46% increase year-over-year. For the full year 2024, VUL captured 15% of the entire individual life insurance market, the highest share since 2006.
Three major forces are pushing this growth. First, equity markets have been on a tear. When stocks rise, the investment accounts inside VUL policies grow, making the whole concept more attractive. Seeing your policy's cash value potentially grow alongside the S&P 500 sounds a lot more exciting than the fixed returns of traditional whole life insurance.
Second, persistent inflation has people worried. When everyday costs keep climbing, locking money into low-yield savings accounts feels like watching your purchasing power slowly erode. VUL offers a way to maintain life insurance protection while potentially keeping pace with or beating inflation through market investments.
Third, more insurers are jumping into the VUL market. As equity markets continued rising, companies that hadn't offered variable products started rolling them out, particularly protection-focused versions with death benefit guarantees. This increased competition means better options and pricing for consumers.
Understanding What VUL Actually Is
Variable universal life insurance is basically two products bundled together: permanent life insurance coverage and a collection of investment accounts. Part of your premium pays for the death benefit that protects your family. The rest goes into investment options you choose—typically mutual fund-like accounts investing in stocks, bonds, or money market instruments.
Here's what makes it different from term life insurance, which is straightforward coverage that expires after a set period. VUL doesn't expire as long as you keep paying premiums, and it builds cash value that you can borrow against or withdraw. Unlike whole life insurance, where the insurance company manages conservative investments and credits your account with steady but modest returns, VUL puts you in the driver's seat. You decide how to invest your cash value, which means you control your risk level and growth potential.
Think of it this way: if whole life is like a savings account with guaranteed but modest interest, VUL is like having a brokerage account attached to your life insurance. When markets are up, your cash value can grow significantly. When markets drop, so does your account balance. This volatility is precisely why VUL isn't for everyone, but also why aggressive investors find it appealing.
Who's Actually Buying This?
The surge in VUL sales isn't coming from typical first-time life insurance buyers. The primary market is high-income professionals and business owners with higher risk tolerance who understand investment principles. These are people already maxing out their 401(k) and IRA contributions who want additional tax-advantaged growth opportunities.
High-net-worth individuals increasingly use VUL in estate planning. The death benefit can provide liquidity to pay estate taxes without forcing heirs to sell family businesses or property. The cash value grows tax-deferred, and death benefits generally pass to beneficiaries tax-free. For wealthy families, VUL compresses multiple objectives into one structure: protection, tax-efficient growth, liquidity, and wealth transfer.
But you don't need to be ultra-wealthy to consider VUL. If you're a 45-year-old professional with stable income, comfortable with investing, and wanting permanent coverage that builds cash value aggressively, VUL could fit. The key qualifier is that comfort with market volatility. If watching your investment accounts swing up and down keeps you awake at night, this probably isn't your product.
The Risk Factor You Can't Ignore
Let's be clear about something that gets glossed over in sales presentations: you can lose money with variable universal life insurance. The investment accounts inside your policy fluctuate with market conditions. If you allocate heavily to stock funds and the market crashes, your cash value drops. Unlike traditional universal life with minimum guarantees, VUL offers no floor on investment performance.
Here's where it gets tricky. Your policy has ongoing costs—insurance charges, administrative fees, mortality costs that increase as you age. These come out of your cash value. If your investments perform poorly and your cash value shrinks, you might need to pay higher premiums to keep the policy from lapsing. Imagine facing a premium increase during a recession when money is already tight. That's a real risk with VUL.
The fees in VUL policies also deserve attention. Beyond the cost of insurance itself, you're paying investment management fees on the underlying funds, administrative charges, and surrender charges if you cancel early. These fees compound over time and can significantly eat into your returns, especially in the early years when cash value is building slowly.
How to Approach VUL in 2025
If you're considering variable universal life insurance given its current popularity, start by honestly assessing your financial situation and risk tolerance. Do you have emergency savings covering six months of expenses? Are you maxing out employer retirement plans? Do you genuinely need permanent life insurance rather than cheaper term coverage? If you can't answer yes to all three, VUL probably isn't your move right now.
Work with a financial advisor who doesn't earn commissions on insurance sales. VUL policies generate significant commissions, which can create conflicts of interest. A fee-only advisor can objectively evaluate whether VUL fits your overall financial plan or whether alternatives like term life plus separate investments make more sense.
Compare multiple carriers and policies. The 41% growth means more competition, which should translate to better products and pricing. Look at the investment options available, the fees charged, the flexibility to adjust premiums and death benefits, and the insurer's financial strength ratings. Not all VUL policies are created equal.
The surge in VUL popularity doesn't automatically make it right for you. Strong equity markets have made these policies look great recently, but markets don't rise forever. Make sure you understand both the upside potential and the downside risks before committing to premiums you'll likely pay for decades. Variable universal life insurance is a sophisticated financial tool that can provide real value for the right person in the right circumstances—but only if you go in with eyes wide open about what you're actually buying.
