As more Filipinos become financially conscious and curious about investing, variable unit-linked insurance (VUL) continues to generate both interest and confusion.
In the latest episode of BusinessWorld B-Side, Ivan Corcuera, Head of Insurance Investments at Sun Life Investment Management and Trust Corporationexplains how VUL works, if it’s worth it, and why it’s important to understand its basics before investing.
Mr. Corcuera emphasized that there is no one-size-fits-all solution to financial planning. A person’s needs vary depending on life stage, responsibilities, and goals. A single professional with no dependents may not prioritize life insurance immediately, while a breadwinner may need more protection.
“A financial advisor will identify the client’s financial needs and provide solutions that will fit the client’s needs, depending on the client’s budget. Even one product, one insurance product, can have many use cases. A person can buy an insurance product as a way to protect their loved ones if something bad happens to the policy owner,” he said.
A key difference highlighted in the discussion was the difference between traditional life insurance and VUL. Traditional products are designed for pure protection, offering guaranteed benefits for a defined period or for the entire life of the policyholder. On the other hand, VUL combines life insurance with an investment component.
“One of the main differences is the real investment part. With the traditional product, it’s pure insurance. If you just need insurance, then this could be the right product for you. If you want the best of both worlds, then we have VULs,” explained Mr. Corcuera.
However, Mr. Corcuera emphasized that the VUL should first be considered as a life insurance product, explaining that a person buys a VUL because it needs protection. Misconceptions arise, he noted, when a VUL is marketed primarily as an investment vehicle. Historically, some clients focused on the proposed benefits presented in policy proposals, expecting continued high growth.
“We need to go back to the basics of what a VUL plan is. You buy a VUL because you need life insurance. You need protection first and foremost,” said Mr. Corcuera. “You can think of the investment component as an add-on – a feature that allows the value of the fund to grow and help pay for insurance costs over time.”
Another topic touched on in this episode is market volatility. Mr. Corcuera explained that risk and return are positively correlated, as higher potential returns come with higher volatility. During the downturn, he advised investors to avoid knee-jerk reactions and instead review policies and maintain calm.
“I think one very important skillthe most important scales for the investor it shouldto be it can beis something to keep their composure. And I always advise clients and advisors to double check before doing anything rash. In fact, some of our advisors would tell our clients to increase contributions or do what we call raising money during a downturn in the market to get money at lower rates,” he said.
Besides understanding product characteristics and market dynamics, Mr. Corcuera emphasized that sound financial planning ultimately depends on meaningful conversations between advisors and clients.
“To me, good guidance starts with listening and asking the right questions. A good financial advisor would often ask: What are your financial goals? What are your priorities? Do you have dependents on your income? Are you focused on protection? Are you looking for wealth accumulation? What job do you have to pay the premiums?” Mr. Corcuera insisted.
Listen to the full episode here: https://open.spotify.com/episode/5xxS2xsQ4P9z8DB1XTUOLF?si=bMtVFSdGSfSGiiQJu3PwA
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