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Zev,

To add to what I last said, the cash value of a VUL may be added to the face amount of the death benefit (this is often referred to as Death Benefit Option B - its premiums are higher), or the death benefit may stay level (Option A) at a lower premium cost.

Your outlook on the tax situation is essentially right, except you may withdraw from the VUL's cash value up to the amount of your basis (total premiums paid) without triggering a tax because it's a return of principle & not a withdrawal of gain. And furthermore any withdrawal (principle or gain) is not subject to any IRS penalty, like pre-59 1/2 withdrawal from VA...

Got it? For more info, go to the Insurance Board & pose your question for a variety of opinions! PP
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