This policy is a combination of variable and universal life insurance. You can choose where to invest your premium dollar and assume all the investment risks associated with that choice like variable life insurance.

Universal variable life is also called flexible premium variable life. This policy mixes the flexible features of universal life and the investment options of variable life. As with universal life, you can raise or lower your premiums in a single policy. As with variable life, you have the right to choose how your cash value will be invested.

The insurance company is not required to make any guarantee on your cash value. With universal variable life, the value of your cash fund is tied to the market value of the assets in the cash value fund. In theory, you could have $15,000 in cash value one day and $10,000 in the next, depending upon market fluctuation. So one of the main problems with universal variable life is that you can lose your insurance coverage.

The ability to hedge your investment bets by choosing different types of investments and the ability to change investment vehicles free of charge a certain number times per year are among the advantages of variable universal life insurance. When you change investment vehicles there are no capital gains. Any investment gains are tax-deferred. You have great flexibility in varying the frequency and amount of premium payments. Partial withdrawals in the terms of loans are possible. If you furnish proof of insurability, you can increase or reduce amount of coverage.

Disadvantages of variable universal life insurance include the potential risk involved. Generally the term insurance within this policy is more costly than buying term insurance outright. Since there are no fixed premium payments, there is no incentive to save or invest. Experts suggest holding a variable universal life policy at least seven to ten years since fees and charges in the early years of the policy, while not as steep as with universal or variable policies, are still significant.