Yes — a variable universal life policy can be sold in a life settlement if you and the policy qualify, because the buyer acquires the contract from you and the insurance company’s consent is not required. Colonial Life is not a party to the decision.
VUL is the policy type where the numbers refuse to sit still. Your premiums, after charges, go into separate-account subaccounts that work like mutual funds, and the cash value rises and falls with the markets. The surrender value quoted to you this month is not the surrender value next month. Owners often find that unsettling, and it complicates every conversation about what the policy is “worth.”
The good news is that a settlement buyer is not really buying the subaccount balance. They are buying a death benefit and taking on a premium obligation. This guide explains what actually drives a VUL valuation, which charges quietly erode the policy, and what to collect before asking anyone for a number. Colonial Life & Accident Insurance Company of Columbia, South Carolina is Unum’s voluntary-benefits brand; confirm your specific product as of 2026. Pine Lake Life Solutions is not affiliated with, endorsed by, or acting on behalf of Colonial Life or Unum.
In This Article
What Sits Inside a VUL Contract
A variable universal life policy has three moving parts. Premiums you pay, less front-end loads, are allocated to subaccounts you selected — equity, bond, balanced, money market. Those subaccounts fluctuate. Against that balance the insurer deducts monthly charges: the cost of insurance, administrative fees, and mortality and expense risk charges, commonly called M&E.
Because the cash value is invested in separate accounts rather than the insurer’s general account, VUL is a security as well as an insurance contract, and it is sold with a prospectus by a registered representative. If you own one, you should have received a prospectus and you receive periodic statements showing subaccount performance. Those statements are the raw material for everything below.
Why Underfunded VUL Gets Dangerous With Age
The structural risk in VUL is the same one that afflicts all universal life, amplified by market exposure. The cost of insurance is not level — it rises every year with the insured’s age, and by the late 70s and 80s it can be very large. Meanwhile M&E and administrative charges take their cut regardless of performance.
In a strong market the subaccounts can outrun the charges. In a flat or falling market they cannot, and the policy consumes itself. A VUL bought in the 1990s on the assumption of high sustained returns can find itself in its insured’s 80s with a shrinking balance and a mounting monthly deduction. When the balance cannot cover the deduction, the policy grace-periods and then lapses — taking a large death benefit with it. That is the outcome a settlement exists to prevent.
What a Buyer Actually Values
Sellers often assume the subaccount balance is the price. It is not. A buyer models three things:
- The death benefit they will eventually collect.
- The premium load — how much they must pay, and for how long, to keep the contract in force.
- Life expectancy for the insured, estimated from medical records.
Existing cash value matters only to the extent it offsets future premiums. That is why a VUL with a battered subaccount balance can still attract an offer, and why a settlement is usually measured against surrender value rather than against the account statement. Published research on the market (GAO-10-775) found sellers commonly received several times surrender value — often in a range of four to eight times — and roughly 10% to 35% of face value. See how offers are estimated.
The Moving-Target Problem
Because the values change, timing and documentation matter more on VUL than on any other product. A surrender value quoted in a review that concludes 90 days later will be stale. Buyers handle this by pricing on the death benefit and the projected premium requirement rather than on a snapshot balance, and by refreshing values before closing.
Practical advice: do not chase the market while a transaction is pending, and do not make dramatic subaccount reallocations mid-process without understanding the effect on the projected lapse date. If your representative suggests a change, ask how it alters the in-force illustration.
| Charge or factor | What it does | Why a buyer cares |
|---|---|---|
| Cost of insurance | Rises every year with the insured’s age | Main driver of future funding needs |
| Mortality and expense (M&E) charge | Ongoing percentage against account value | Steady drag regardless of market returns |
| Administrative fees | Flat monthly deductions | Small but constant erosion |
| Subaccount performance | Raises or lowers cash value | Affects the projected lapse date |
| Surrender charges | Reduce what a cancellation would pay | Lowers the surrender floor a sale is compared to |
Requesting the Right Illustration
For VUL, ask the servicing company for an in-force illustration at multiple assumed rates of return — typically a zero or low rate, a mid rate, and a higher rate — plus the premium required to keep the policy in force to a stated age at each. The low-return scenario is the honest one, because it shows how soon the policy fails if markets disappoint.
Also request the current cost-of-insurance schedule if it is available, and note any surrender charges that still apply. Our guide to what an in-force illustration is walks through the columns. Along with that, gather the policy cover page (send this first) and the most recent annual statement.
Tax and Advice Cautions Specific to VUL
Two cautions worth stating. First, because VUL is a securities product, any recommendation to replace, exchange or surrender it involves suitability rules and possibly a registered representative’s obligations to you. Second, the tax picture on a settlement depends on your cost basis, the policy’s cash surrender value, and the sale price — and a VUL’s basis is often different from what owners assume after years of charges and any partial withdrawals.
Pine Lake does not give legal, tax or investment advice. Take the numbers to your own CPA or attorney before you decide. If a policy has been modified, exchanged, or has outstanding loans, that history matters and should be disclosed early.
Timeline and Closing Mechanics
Expect roughly 60 to 120 days. The steps are: free review from the cover page; document collection including illustrations and statements over two to four weeks; medical records and a life-expectancy estimate; a written offer; contracts; funds into independent escrow; the carrier records the change of owner and beneficiary; escrow releases payment to you. Most states then allow a rescission window during which a seller can unwind the transaction.
Keep paying premiums the entire time. A lapse during the process ends the transaction, and on VUL a market decline plus a skipped payment can push a policy into grace faster than expected.
Deciding Whether to Sell at All
Selling is right when the coverage is no longer needed, the premium has become a burden, or the policy is on a path to lapse and you would otherwise get nothing. It is wrong when the death benefit is still the family’s plan and the funding is sustainable. In between there are middle options — lowering the face amount, changing the funding, or arrangements that keep part of the death benefit while shedding the premium; see policy options and is a settlement worth it.
Buyers generally start at $100,000 in death benefit. To find out where your policy stands, send the policy cover page for a free policy review or call (305) 209-7183. Related: universal life and guaranteed universal life.
Frequently Asked Questions
Is my VUL worth what the subaccount statement says?
Not for settlement purposes. A buyer prices the death benefit, the premiums required to maintain it, and life expectancy. The subaccount balance matters mainly because it offsets future premiums, so a low balance does not automatically mean a low offer.
My surrender value changes every month. How is an offer set?
Buyers model the policy over time rather than pricing a single snapshot, using in-force illustrations at several assumed return rates. Values are typically refreshed before closing so the final numbers reflect current conditions.
What is the M&E charge?
Mortality and expense risk charge, an ongoing fee deducted against account value in a variable policy. It applies whether markets rise or fall, and combined with rising cost of insurance it is a major reason older underfunded VUL policies drift toward lapse.
Should I move my subaccounts before selling?
Be careful. Reallocating changes the projected lapse date and can affect the illustration a buyer is relying on. If a change is suggested, ask how it alters the in-force projection, and consult your own registered representative or advisor.
Does Colonial Life have to consent?
No. The sale is a transfer of the contract from you to the buyer. The carrier’s involvement is limited to recording the change of owner and beneficiary after the transaction closes.
Can a VUL that is losing value still be sold?
Often yes, and that is frequently the best time to look. A policy heading toward lapse pays nothing if it lapses, while a settlement converts the remaining death benefit into a lump sum today for qualifying policies.
How is a settlement taxed?
The treatment depends on your cost basis in the policy, its cash surrender value, and the amount received, and it can be more complicated on a VUL after years of charges or withdrawals. This is not tax advice; review the specifics with your own CPA.
What should I send first?
The policy cover page showing the insurer, policy number, face amount and issue date. That single page is enough for a free policy review. Call (305) 209-7183 if you would rather talk it through.
Find out what your policy is worth — free, confidential, no obligation.
A 15-minute educational review covers your eligibility, every alternative, and a realistic view of what each path would net you.
Related Reading
- How Much Can I Get For My Life Insurance Policy
- What Is An In Force Illustration
- How It Works Policy Options
- Is A Life Settlement Worth It
- Sell My Colonial Life Universal Life Policy
- Sell My Colonial Life Guaranteed Universal Policy
Pine Lake Life Solutions does not purchase life insurance policies and does not provide legal, tax, or investment advice. Information provided is for educational purposes only. Eligibility for any option, including life settlements, is not guaranteed and depends on individual circumstances, policy terms, underwriting, and market conditions. Consult independent legal, tax, or financial professionals before making decisions regarding a life insurance policy.