Single Pay VUL or Mutual Fund/UITF?

There are a lot of questions in the market of which is better: Single Pay VUL or Mutual Fund/UITF?

My initial answer is this: IT DEPENDS on what is your objective.

At the end of this article, hopefully you can decide which is the better financial product for you.

Pooled Funds

VUL (Variable Unit Life Insurance), Mutual Funds, and UITFs (Unit Investment Trust Funds) are all Pooled Funds.

Meaning, you buy units/shares of the funds which is being managed by a professional Fund Manager.

You don’t buy individual stocks or bonds but you buy shares of the fund. You don’t have any control on how the fund is being managed.

The idea here is that you let the experts do their job and you do what you are good at which is earning money so you can invest.

You can choose what types of funds you can invest in such as 100% equity (stocks), 100% bonds, or a combination of both.

The basis of choosing a Fund Manager is their past performance (preferably 10 years or more) and the credibility of the company. It cannot guarantee future fund performance but it can lessen the risks of investing in a fly by night company.

Below is a sample of a Fund Manager which I recommend:

Single Pay VUL

Single Pay VUL is a financial product that combines life insurance and investments.

The minimum investment amount is P100,000 and it provides a 125% insurance of the invested amount (i.e. P125,000).

You can also do additional investment (top-up) which will also give you an additional 125% coverage. The most common minimum top-up is P20,000 ( gives you additional P25,000 insurance).

The initial charge is 3% for a P100,000 and .05% for P1 Milllion. Meaning, you get an almost “free” insurance coverage and 97% or 99.5% of the investment goes to investment.

Mutual Fund/ UITF

Mutual Fund and UITF is almost the same in terms of the features it provides. The main difference is that a Mutual Fund is being offered by a Mutual Fund Company while an UITF is being offered by the banks.

They don’t give any life insurance coverage but almost have the same initial charge + other charges.

Mutual Funds and UITF are more affordable than Single Pay VUL since the minimum amount of initial investment is P5,000-P10,000. (You might be confused since there are regular and limited pay VUL that can be bought for P1,500 per month but this can’t be compared to it since they are not an apple to apple product).

Below is a table to show the difference between VUL and Mutual Fund/UITF:

Some VUL products allow Free 4 Fund Switching every year. Meaning, you can choose to move your investments into different funds such as 100% stocks, 100% Bond, Growth (80% stocks, 20% bonds), Balanced (50-50), etc.

For Mutual Funds and UITFs you need to withdraw the amount then buy the desired fund which will result to entry charges (and withdrawal charges, if applicable).

The Main Advantage of VUL

The main advantage of VUL to Mutual Fund and UITF is that because it’s a Life Insurance Product, it is not subject to the 20% Estate Tax.

Let’s say that your net estate is P10 Million (hypothetically almost all is placed in a Mutual Fund/UITF), you can’t withdraw the money until you paid the P2 Million Estate Tax to the BIR.

In the case of a VUL, if the total invested amount is P10 Million, your family will get P12.5 Million OR Fund Value (Principal + Return on Invest) whichever is higher without any taxes!

To end, are you willing to give 20% of your money to the government?

I am not saying that you should not invest in Mutual Funds or UITFs, but at the end of the day, the question is are you willing to give 20% of your entire wealth to the government or you want to give AT LEAST 125% of your wealth to your family?

Your Millennial Wealth Planner,

Harold Q. Gardon, CWP, CEPP


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