Should you choose universal life insurance or unit life insurance?

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In recent years, investment-linked insurance has emerged as an option to help participants `receive insurance benefits while still taking advantage of profitable opportunities. Investment-linked insurance is divided into two main product lines: universal life insurance and unit-linked insurance.

Basically, these two types of products have the same thing as a combination of insurance and investment elements, helping participants increase asset value through entrusting to associated funds. However, these two types of insurance also have many differences and participants need to understand to avoid mistakes and make appropriate decisions.


In addition to the basic insurance costs, the annual payment amount will be partly deducted from the general association fund, or the unit linked fund.

According to Article 3 of Circular 52/2016/TT-BTC, universal life fund is a fund formed from premiums of universal life insurance contracts and belongs to the policyholder fund. The assets of the universal life fund are not divided but are common to all linked insurance policies.

According to Clause 1, Article 3 of Circular 135/2012/TT-BTC, a unit-linked fund is a fund formed from the insurance premiums of the insurance buyer for unit-linked insurance contracts and is a portion of the insurance policyholder fund.
In terms of investment, the main types of assets of universal life funds are usually term deposits, bonds of all kinds (owners, businesses, ...) should have a low risk ratio. In addition, insurance companies often commit to a minimum investment interest rate for this product.

For unit-linked funds, investment assets are more diversified, including deposits, bonds, stocks, etc. Participants in this insurance package are entitled to choose one or more single-linked funds. entity to invest and receive the full results according to the selected unit-linked fund, regardless of profit or loss. Also because of this feature, unit-linked insurance has a higher yield, but comes with a greater risk.

Regarding the regulations on additional fees, with universal life insurance, the periodic premium payment must not exceed 5 times the premium for the first year. For example, in the first year to pay 10 million, in subsequent years, customers cannot pay more than 50 million/year.

With unit-linked insurance, the recurring premium cannot exceed 10 times the premium for the first year. That is, as in the above case, in the following years, customers cannot pay more than 100 million/year.

In terms of costs to be paid, both of these products share similar fees such as initialization fees, risk premiums, contract management fees, fund management fees, early contract cancellation fees, and fees. additional payment and withdrawal fees. In particular, the initial fee of unit-linked products is usually higher than universal life insurance.

In addition, unit-linked insurance also has an additional fee for converting unit-linked funds. This fee is incurred in case the client changes his/her risk appetite and wants to switch to a more profitable or safer fund.

Thus, besides insurance needs, if customers want a safe and low-risk investment solution, universal life insurance will be a more reasonable choice. If you are looking for a better profit opportunity and accept the risk, unit-linked insurance will be the right fit.



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