Variable Life Insurance

Variable life insurance is a type of permanent life insurance that provides lifelong protection. The difference between variable life insurance and other types of insurance is that variable life allows you to make choices about where the premium is invested. You can select from a variety of investment options within the insurance company’s portfolio.

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Benefits of Variable Life Insurance

• Life insurance policies allow you to make your own investment choices. Choose from a portfolio of mutual funds that includes stocks, bonds and money market funds.
• The cash value earned from your investments accumulates tax free.
• If your investments do well, you build a higher cash value and a larger death benefit.
• The premium for a variable life insurance policy is fixed, meaning the rate will never increase over the life of the policy.
• Despite the risks involved with investments, you are always guaranteed that the death benefit will never go below a specific level, so your beneficiaries are assured to receive an adequate payout.

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How Variable Life Insurance Works

Part of the premium you pay for a variable life insurance policy goes toward the insurance, while the rest goes into the cash value. The cash value is invested in a “portfolio” of funds that contain sub-accounts. You select the sub-accounts where the money is invested (stocks, bonds, money market funds).

Variable Life Insurance Investment Risks

Since the cash value is built as a result of investment choices, you always have the risk that an investment won’t perform well and the money will start to decrease. You will always see fluctuations of cash value, but if the cash value dips too low, the insurance company will request that you pay more in premiums to prevent the policy from lapsing. The performance of your investments not only impacts the death benefit, but can affect your premium payments as well.

While the investments are risky, they can certainly yield very favorable results. Experts advise that you diversify your investments so that you can offset any poor performance with favorable returns on other sub-accounts.

Finding the Best Life Insurance Rate

As with any type of permanent life insurance, a variable life policy will have pricey premiums. If cost is a major factor for you, consider a term life insurance policy. Get a free quote and discover how affordable this option can be.

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