Variable Life Insurance
Variable Life Insurance policies combine the benefits of a Permanent Life Insurance Policy with the benefits of a savings account, with which you can invest in stocks, bonds, money market accounts or mutual funds. A portion of your premium will be applied to this separate investment account. With this policy the value of your accumulated cash account and the death benefit may increase faster, but it carries more risk as well. You will not be taxed on the profits of this investment until the policy is cashed out by you or your beneficiaries. If the investments in your account do not perform well, or lose value, your death benefits may decrease. Many policies will set a minimum amount on the death benefits, but the investment portion of your premiums will not typically guarantee a minimum return.
We recommend that you speak to a local licensed insurance agent so that you can learn more about this type of insurance. Please feel free to contact the licensed agents listed on our site for more information.
What is Variable Life Insurance?
Much like Universal Life, Variable Life insurance is a type of Permanent Life insurance that affords the purchaser more flexibility than a traditional Whole Life insurance policy.
You may sometimes also see Variable Life insurance referred to as Variable Appreciable Life Insurance.
As in all Permanent Life insurance policies with a cash value, Variable Life (VL) allows you to put a portion of your monthly premium into tax-deferred savings. However, Variable Life policies allow you to choose where the money is invested such as into equity funds, a money market fund, bonds, stocks, or some combination of accounts. With Whole Life and Universal Life policies, the insurance company determines how funds are allocated.
The potential rate of return is highest with a VL policy because you are able to choose your investments. However, VL is also the riskiest, as both the death benefit amount and cash value rise and fall depending on the performance of those investments. The good news is that most VL policies will guarantee that the benefit amount will not drop below a pre-determined minimum. To decide on the minimum amount of Variable Life insurance you require, use our benefits calculator.
Variable Life is considered an investment product purchased by the consumer and therefore represents a securities contract regulated by the Federal Government and must be sold with a prospectus.
Additional things to consider about Variable Life Insurance