The main features of a variable universal life policy are a mix of those typically found in variable life and universal life policies:

Your premiums are adjustable.

You have the ability to skip a payment or even stop paying your premium if the cash value of your policy can cover the costs, says the nonprofit group Life Happens. This is a feature borrowed from universal life insurance, and it may be helpful if an emergency leaves you short of cash.

You have investment variety and risk.

As with a variable life policy, variable universal life lets you invest in underlying sub-accounts offering a variety of investment options. These investments are tied to financial markets, and the value of your policy may fluctuate as the value of your chosen investments go up or down. While the reward can be great, you're also taking on risk that can reduce your cash value and, if by policy provisions the policy lapses, your death benefit could be lost as well, says the Insurance Information Institute (III). The upside? Transferring funds between investments is tax-free, so you're not constrained by the potential tax implications, says Life Happens.

With VUL policies, you choose from a few investment options for your policy's sub-accounts. Life Happens states that you can typically invest in stocks, bonds or a combination of the two. You can also opt to invest in a fixed account, which provides a guaranteed minimum interest. The value of your policy's sub-accounts fluctuates based on how these investments perform. If they do well, your policy's value increases. If the investments decrease, though, your cash value will decrease as well.

You can increase the death benefit.¹

If your insurance needs change over time, you can increase or decrease your coverage, says Life Happens. For instance, you may be able to request a death benefit increase or make a lump-sum payment to boost the policy's cash value (though the IRS has limitations on how big that one-time payment can be), the group says.

You can withdraw or borrow from it.²

Like some other permanent life insurance options, a variable universal life policy allows you to withdraw funds or take out a loan against the cash value. The downside is that a withdrawal or a loan can reduce your death benefit or result in a tax liability if you don't follow guidelines on repayment.