The 2025 Reality Check

If you have talked to a financial advisor in the Philippines, chances are you were pitched a VUL.

Not MP2. Not index funds. Not even a basic term insurance plan.

A VUL.

And yet, the data is already clear. For most Filipinos, VUL has underperformed against almost every sensible alternative. So the real question is not whether VUL is good or bad.

The real question is this.

Why is VUL still being sold?

First, What a VUL Really Is (No Marketing Spin)

A Variable Universal Life insurance policy is simply:

• Life insurance
• Plus an investment component
• Minus high fees

Your premium is split into two parts.

One part pays for insurance. The other part goes into funds that invest in stocks or bonds.

Sounds fine in theory.

The problem is execution.

The Underperformance Problem No One Likes to Show

Before going further, this needs to be clarified.

The commonly quoted “7 to 10 years to break even” is not a typical outcome. It is an optimistic projection based on ideal assumptions. In reality, once fees, rising insurance charges, and uneven market performance are accounted for, the break-even period is usually much longer.

In marketing illustrations, VULs are often shown to break even in about 7 to 10 years. However, under realistic, real-world conditions, many policyholders take closer to 12 to 15 years to recover their total premiums paid. Some never fully break even at all.

Let us be honest. Most VUL buyers were told some version of this:

• Long-term investing
• Compounding
• Market participation
• Insurance while you invest

What they were not clearly shown:

• Front-loaded fees in the first years
• Policy charges that never disappear
• Fund management fees on top of insurance costs

Compare that to alternatives:

• Pag-IBIG MP2 with no fees and tax-free dividends
• Index funds with significantly lower expense ratios
• BTID where insurance and investing are separated

When you compare net returns, VUL usually comes last.

So Why Is VUL Still Being Sold in 2025?

1. Commissions Are Too Attractive to Ignore

This is the uncomfortable truth.

VUL commissions are massive, especially in the first year. This creates a strong incentive to sell VUL regardless of suitability.

Term insurance does not pay nearly as much.

MP2 pays nothing to agents.

Index funds require actual investing education.

From a sales perspective, VUL is the easiest product to push.

2. It Is Easier to Sell a Dream Than Math

Try selling BTID properly.

You need to explain:

• Risk
• Discipline
• Volatility
• Long-term commitment

Now compare that to VUL marketing:

• Pay one amount
• You are insured
• You are investing
• Just wait and be patient

No spreadsheets. No hard numbers. Just projections.

It sounds safe. It feels simple. It sells.

3. Most Buyers Never Track Performance

Once the policy is signed, many people stop checking.

Statements are ignored. Fund performance is misunderstood. Losses are rationalized as market cycles.

By the time reality hits, the sunk cost fallacy kicks in.

“I already paid for years. Might as well continue.”

That mindset alone keeps VUL alive.

4. Financial Illiteracy Is Still a Huge Problem

This is not an insult. It is a structural issue.

Many Filipinos:

• Do not understand fees
• Do not compute net returns
• Do not compare alternatives

Without proper comparison, VUL appears reasonable.

In reality, it is simply expensive convenience.

The BTID Comparison That Changes Everything

BTID stands for Buy Term, Invest the Difference.

Instead of paying for a bundled product:

• You buy term insurance separately
• You invest on your own

Where can you invest?

• Pag-IBIG MP2
• Index funds
• Dividend stocks
• Even conservative bond funds

The result in most cases:

• Higher net returns
• Better transparency
• More flexibility

And yet BTID is rarely pushed.

Ask yourself why.

Is VUL Ever Justifiable?

To be fair, VUL is not automatically evil.

It may make sense if:

• You absolutely will not invest on your own
• You understand the fees fully
• You are okay with lower returns

But it should never be marketed as the best investment.

It is not.

The Real Cost of a Bad Recommendation

The biggest damage VUL causes is not just poor returns.

It is opportunity cost.

Years that could have been spent:

• Building real investments
• Growing tax-free MP2 savings
• Learning basic portfolio management

Instead, those years are spent paying fees.

Blogger’s Corner

VUL is still being sold not because it is the best option.

It is still being sold because it is profitable for sellers, easy to market, and rarely questioned.

If you already have a VUL, this is not about blame.

It is about awareness.

Before signing anything that mixes insurance and investing, always ask one simple question:

Who benefits more from this product, me or the person selling it?

That question alone can save you years of regret.