Why Your VUL Fund Value May Be Lower Than You Expected

A disappointing VUL fund value does not automatically mean the product was fake. It may mean the projection was remembered as a promise, the charges were heavier than expected, or the market did not perform well.

There is a moment many VUL owners eventually experience.

They check the fund value.

Then they feel confused.

After years of paying premiums, the number may look smaller than expected. Maybe it is lower than the total premiums paid. Maybe it grew, but not as much as the proposal seemed to suggest.

That is usually when frustration begins.

People start asking if VUL is a scam. They compare it with mutual funds, UITFs, stocks, REITs, digital banks, or whatever investment became popular later. They wonder why the money did not grow the way they imagined.

I understand the frustration.

But before judging the product, it helps to separate three things: the projection, the charges, and the actual fund performance.

A VUL can disappoint you because one of those things went wrong.

Sometimes all three did.

The projection was never the promise

VUL proposals usually show projected values.

That is part of what makes them attractive. You can see a table showing possible fund values years into the future. The numbers make the future feel visible.

The problem is that the projection can stay in your memory like a promise.

Even if the page says the values are only for illustration, the mind remembers the attractive number. You may technically know the returns are not guaranteed, but emotionally, you still hope the policy gets close.

That is where disappointment starts.

The Insurance Commission’s VUL guidelines require disclosures around illustrated values, non-guaranteed returns, and investment risk. The policyholder should understand that actual fund values can vary, and that investment risk belongs to the policyholder.¹

This is not a small warning.

It is the core of the product.

A VUL fund value can rise, fall, grow slowly, or stay below expectations for years. It can be affected by market performance, charges, withdrawals, missed premiums, and the fund choices inside the policy.

The projection gives a possible path.

It does not guarantee the destination.

The fine print was already saying it

What surprised me while looking back at an old VUL proposal was that many warnings were already there.

The proposal showed possible values using assumed annual returns. In that old illustration, the rates shown were 4%, 8%, and 10%. But the same page said those numbers were for illustration only, were not forecasts of future fund performance, and that actual returns may differ.

Another page said the unit values were not guaranteed and would depend on actual fund performance. It also said the policy value could be less than the capital invested, and that the investment risks would be borne by the policyholder.

So the issue was not always that the proposal said nothing.

Sometimes, the issue was that the buyer remembered the projection more than the warning.

That is uncomfortable, but useful.

A VUL proposal can show both the dream and the disclaimer on the same set of pages. If you only remember the dream, the policy may feel unfair later, even if the document had already explained the risk.

Charges reduce what actually gets invested

Many people compare their VUL fund value with the total premiums they paid.

That comparison is understandable, but incomplete.

Not every peso of a VUL premium goes into the investment fund.

Part of the premium pays for insurance protection. Part may go to riders. Part may cover administrative expenses, fund management, commissions, or other policy charges depending on the product.

That is not automatically wrong.

Insurance has a cost. Fund management has a cost. Distribution has a cost. Protection has a cost.

The problem is when the buyer evaluates the policy like a pure investment account.

In one older VUL proposal I reviewed, the early premium charges were very high: 95% in the first year, 95% in the second year, 40% in the third year, 20% in the fourth year, and 10% in the fifth year. That was one old proposal, not a universal rule for every VUL today. But it shows why the charges page matters.²

If a buyer only remembers the projected fund value but forgets the charges, the early years can feel shocking.

You paid money.

The fund value is low.

It feels like nothing happened.

But something did happen. Part of the premium paid for insurance and charges before the remaining amount worked inside the fund.

The market may have disappointed you too

The next issue is fund performance.

Even if charges were explained properly, the fund still needs to perform.

Many Filipino VUL buyers were placed in local equity or balanced funds. That made sense in the sales story. If you were young, equities sounded right. Long-term growth. Philippine economy. Time in the market.

But actual market experience matters.

Current Philippine Investment Funds Association data shows that several Philippine equity mutual funds had weak or negative 10-year returns, while some foreign or global funds showed stronger performance.³ Mutual funds are not exactly the same as VUL funds, but the data gives useful context: local equity exposure has not automatically rewarded investors over the past decade.

This matters because a weak VUL fund value may not be a VUL-only issue.

If you had invested separately in a similar local equity fund, you may have been disappointed too.

That nuance is important.

The product structure matters. The charges matter. But the actual fund exposure matters too.

The practical rule

A disappointing VUL fund value does not automatically mean you were scammed.

It may mean the projection stayed in your mind as a promise.

It may mean the charges were not fully understood.

It may mean the fund underperformed.

The right response is review.

Look at the current fund value, charges, insurance coverage, fund performance, and future premium requirements. Ask what happens if you keep paying, stop paying, switch funds, or surrender.

VUL becomes easier to understand when you stop treating it as one mysterious product.

It is insurance, charges, and market exposure inside one contract.

All three matter.

Sources

¹ Insurance Commission, Circular Letter No. 2017-34, “Revised Guidelines on Variable Life Insurance Contracts.”

² Sample 2014 VUL proposal reviewed by the author, including acknowledgement of variability, illustration of benefits, premium charges, and investment-risk disclosures. Personal details omitted.

³ Philippine Investment Funds Association, “Facts & Figures,” mutual fund performance tables.

⁴ Insurance Commission, Circular Letter No. 2021-51, amendment to Circular Letter No. 2017-34.

For educational purposes only. Not insurance, investment, legal, or financial advice. VUL policy features, charges, funds, guarantees, risks, surrender rules, and premium requirements vary by insurer and contract. Review your own policy and consult a licensed advisor or qualified professional before buying, surrendering, topping up, or changing coverage.