Yes – a variable universal life policy can be sold in a life settlement when the policyholder and the policy qualify; the buyer purchases the contract, the insurance company’s permission is not needed, and the carrier is not a party to your decision. Its role at closing is administrative: recording the new owner and beneficiary.
Before that matters, confirm what you own. Homesteaders Life Company is a mutual insurer headquartered in West Des Moines, Iowa whose business is overwhelmingly pre-need funeral insurance sold through funeral homes. Pre-need coverage is small-face permanent insurance tied to a funeral arrangement, with no separate account and no subaccounts. A true VUL is a registered security sold with a prospectus by a securities-registered representative. Those are different animals. As of 2026, confirm the issuing company and the product with the carrier before you gather anything else.
If you do hold a VUL, the rest of this page explains why the number on your statement keeps moving and why buyers largely ignore it. Pine Lake Life Solutions is not affiliated with, endorsed by, or acting on behalf of Homesteaders Life Company or any funeral home. Education only – not legal, tax or investment advice.
In This Article
- How to Tell a VUL From a Pre-Need Policy in Sixty Seconds
- Where the Money Actually Sits
- The Charge Stack That Drains an Underfunded VUL
- Why Buyers Look Past the Subaccount Balance
- Ask for a Low-Return Illustration
- Documents, Process and Timing
- Sell, Surrender, Keep – or Something in Between
- Frequently Asked Questions
How to Tell a VUL From a Pre-Need Policy in Sixty Seconds
Look at the annual statement. A variable universal life policy will show subaccount names and unit values, an allocation percentage across funds, and asset-based charges. Somewhere in the file there will be a prospectus, because VUL is a registered security.
A pre-need funeral policy shows none of that. It shows a face amount sized to a funeral, often a funeral home as beneficiary or assignee, and sometimes a benefit that grows to track the cost of the goods and services selected. If a funeral home appears anywhere on the document, treat it as pre-need coverage – and understand that pre-need policies are generally not sellable, both because they are small and because the assignment to the funeral home is often irrevocable.
Where the Money Actually Sits
In a VUL, cash value is invested in separate-account subaccounts that function like mutual funds – equity, bond, balanced, money market. Those assets are legally segregated from the insurer’s general account, and you, not the insurer, bear the investment risk. There is no declared crediting rate and no guaranteed floor on the investment side.
That is the whole reason the surrender value quoted this month will differ from next month’s. Nothing is malfunctioning. If you are comparing options, make sure the value quote and the illustration you are working from carry the same date, or you are comparing two different policies.
The Charge Stack That Drains an Underfunded VUL
Every year, four layers of cost come out of the policy:
- Mortality and expense risk (M&E) charges against the separate account.
- Cost of insurance, which is age-banded and climbs steeply through the seventies and eighties.
- Administrative and per-thousand policy charges.
- Fund-level expenses inside each subaccount.
In strong markets, returns absorb the stack and the owner never notices. In flat or falling markets – or when premiums were reduced during good years because the illustration said they could be – the charges start eating principal. The balance shrinks, the same charges consume a larger share of what remains, and the policy accelerates toward lapse. That is when the carrier sends a notice asking for a far larger premium, and that is what usually brings VUL owners to the secondary market.
| Feature | Variable Universal Life | Pre-Need Funeral Policy |
|---|---|---|
| Where cash value sits | Separate-account subaccounts you select | Insurer’s general account |
| Who bears investment risk | The policy owner | The insurer |
| Sold with a prospectus | Yes – it is a registered security | No |
| Typical face amount | Often $100,000 or more | Commonly under $25,000 |
| Common beneficiary | Family, trust or business | Frequently the funeral home |
| Settlement outlook | Reviewable if large enough | Generally not sellable |
Why Buyers Look Past the Subaccount Balance
A buyer is purchasing a future death benefit and accepting the obligation to fund the policy until it pays. Their inputs are the death benefit, the premium load required to carry the contract to life expectancy, and the insured’s life expectancy from medical records.
The account value matters only as a cushion that delays the next premium. In practice, a buyer who acquires a VUL will typically move the allocation to a conservative option after closing, because the goal is a reliable, low-cost hold rather than investment return. So a battered subaccount balance with a large death benefit and workable charges can price well, while a healthy balance inside a high-cost contract may not. The GAO’s market study (GAO-10-775) found sellers typically received about 10% to 35% of face value, roughly four to eight times cash surrender value – documented ranges, not a quote. See how much a policy can bring.
Ask for a Low-Return Illustration
VUL illustrations are only as honest as the assumed rate of return. A run at a cheerful assumed rate can show the policy thriving to age 100; the same policy at a conservative rate may show it lapsing in a handful of years.
Request three things from the issuing company: an in-force illustration at guaranteed charges with a conservative assumed return, a second at current charges, and the remaining surrender charge schedule. Then look only at the projected lapse dates. That comparison is the real state of your policy. Our guide to reading an in-force illustration covers what each column means.
Documents, Process and Timing
To start a free review, send only the policy cover page. If the policy advances, the file adds the latest annual statement with the current allocation, both illustrations, the loan and withdrawal history, a HIPAA authorization for life expectancy underwriting, photo ID, and trust or corporate documents if an entity owns the policy.
Expect roughly 60 to 120 days overall. Keep paying premiums throughout, and avoid large reallocations while a transaction is pending – changing the allocation can move the projected lapse date an offer was based on. Pine Lake does not give investment advice; that conversation belongs with your own registered representative. Your proceeds should sit with an independent escrow agent until the insurer confirms the ownership transfer, and most states then give you a rescission window.
Sell, Surrender, Keep – or Something in Between
Surrender pays the current cash surrender value net of any remaining surrender charge and ends the coverage. Lapse pays nothing. A settlement converts the contract into a lump sum now. And on some transactions you can retain a portion of the death benefit while eliminating premiums entirely – compare all of them in how the policy options work.
Keep the policy if heirs depend on it and the premium is comfortable. Consider a settlement when the reason for the coverage has ended, the required premium has outgrown the policy’s value to your family, or the projected lapse date is close. Pine Lake reviews policies with a death benefit of $100,000 or more; check the basics in what policies qualify. Proceeds may have tax consequences – ask your own CPA. To begin, send the policy cover page for a free, no-obligation review or call (305) 209-7183.
Frequently Asked Questions
Can a variable universal life policy be sold?
Yes, if the policyholder and the policy qualify. A life settlement transfers the insurance contract to a buyer, and the fact that VUL is a registered product does not prevent that. The insurance company’s permission is not required.
Does Homesteaders Life issue variable universal life?
Homesteaders Life Company is known for pre-need funeral insurance sold through funeral homes, which has no separate account or subaccounts. If your statement shows subaccounts, confirm the issuing company with the carrier as of 2026 – the policy may have come from a different insurer.
Why does my VUL value change every month?
The cash value is invested in separate-account subaccounts that move with the markets, and charges are deducted from that balance regularly. Always match your value quote to the date of the illustration you are relying on.
Do strong subaccount returns increase my offer?
Generally not much. Buyers price the death benefit, the premium required to carry the policy to life expectancy, and the insured’s life expectancy. The account value matters mainly as a cushion that delays the next premium payment.
What are M&E charges?
Mortality and expense risk charges are asset-based deductions from the separate account that compensate the insurer for insurance risks and expenses. They sit on top of the age-banded cost of insurance, administrative charges and the fund fees inside each subaccount.
Which illustration should I request for a VUL?
One at guaranteed charges with a conservative assumed rate of return, and a second at current charges. Compare the projected lapse dates in each. A cheerful assumed return can hide how close the policy actually is to lapsing.
Should I change my subaccounts while a sale is pending?
Talk to your own financial adviser first, and avoid large reallocations. Changing the allocation can shift the projected lapse date that an offer was based on. Pine Lake does not provide investment advice or recommend specific funds.
How long does the process take?
Typically 60 to 120 days from the free review to funded payment. Keep paying premiums the entire time and expect your funds to be held in independent escrow until the insurer confirms the transfer of ownership.
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Related Reading
- What Is An In Force Illustration
- How Much Can I Get For My Life Insurance Policy
- How It Works Policy Options
- What Policies Qualify For Life Settlement
- Sell My Homesteaders Universal Life Policy
- Sell My Homesteaders Term 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.