Term vs VUL Break-Even

Term life is pure protection — you pay a small annual premium, and if you die within the term your beneficiaries get the face amount. No cash value, no investment component. VUL (variable universal life) bundles term insurance with an investment fund: your premium pays for both the cover and an attached unit-linked fund. VUL is usually 4–8× more expensive than term for the same death benefit.

You buy the cheaper term policy, then take the annual premium you would have paid for VUL minus what you actually paid for term, and invest that difference yourself in a low-cost index fund (FMETF), mutual fund, or balanced fund. Over a long horizon, DIY investing typically beats VUL because VUL funds carry mortality, admin, and rider charges that drag returns.

Three honest cases: (1) you're a chronic non-saver and the forced premium discipline is the only way you'll save; (2) you want a single bundled product and value the convenience; (3) the VUL fund return materially outperforms what you'd realistically achieve DIY (rare given fees). For most disciplined savers, term + DIY wins.

PH VUL equity funds have historically returned 6–8% per year over rolling 10-year windows, but fund fees of 2–3% are baked in. Use 7% as a midpoint. Don't use the 10–15% projections agents sometimes show — those are illustrative, not promised.

If you'd invest in PSEi-tracking FMETF or a broad balanced mutual fund, 8–10% is realistic for the equity portion over long horizons. If you'd invest more conservatively (bond fund, money market), use 4–6%. The DIY edge depends on your actual portfolio — not what you wish you'd do.

Years 1–3 of a VUL, most of your premium pays charges (mortality, admin, surrender). Steady-state, 80–90% of the premium flows into the fund. We use a single average allocation for simplicity. If your VUL policy illustration shows year-by-year allocation, average the steady-state years.

Both term and VUL pay the face amount on death — that's the same. This tool isolates the question: if you live through the coverage horizon, which option leaves you wealthier? It assumes you survive; the death-benefit case is identical for both products (at the face amount you set).

The model uses nominal pesos throughout, so both columns are comparable. If you want a real-terms answer, subtract your inflation assumption (3–4% in PH) from both DIY and VUL fund returns — the comparison still holds, the absolute peso figures just shrink.

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