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Variable Life Insurance Basics

Variable life insurance is a whole life insurance policy that has a significant investment aspect. This makes the policy more risky than a traditional whole life insurance policy, but it does offer the possibility of being worth more than a traditional whole life insurance plan. Because of the added risk, especially considering the possibly volatility of the market, it is important to understand variable life insurance basics.

 

Variable Life Insurance Is Whole Life Insurance

There is much confusion out there about variable life insurance and many wonder if it is more of a short term policy or a whole life insurance policy. A variable life insurance policy provides permanent life insurance protection in which you will pay a premium on a regular basis, just like whole life insurance.

The premiums are fixed and there may be a minimum death benefit to be paid out with some variable life insurance policies, but the big difference is in the investment opportunities available and the flexibility of those investment opportunities.

 

Variable Life Insurance Death Benefit Will Fluctuate

As your variable life insurance policy progresses, the death benefit will fluctuate according to the performance of your investments included in the policy. It may go up or down and when it is time for the death benefit to be paid out, the amount will be subject to the current performance of your investment portfolio contained in the policy.

 

Variable Life Insurance Policies Can Be More Expensive

It is true that you will probably have to pay more for a variable life insurance policy than traditional whole life insurance or term life insurance. This is because of the funding required for the investment portion of the policy. It costs more to fund this aspect of the policy and if it goes without funding, the policy may lapse. However, the possibility of a greater death benefit is beneficial.

 

Variable Life Insurance Can Earn Interest

With a variable life insurance policy, there is the potential to earn interest on your investment. This interest can then be put toward the premiums of your life insurance policy and the amount you will be paying toward your premium will decrease. Also, this type of whole life insurance policy earns you money, and this money is tax-deferred.

 

Variable Life Insurance is Regulated under Federal Securities Laws

Because of the investment aspect of a variable life insurance policy, it is treated somewhat differently than other life insurance policies. With a variable life insurance policy portfolio there may be included stocks, bonds, money market funds and equity funds which are considered investment risks and securities contracts. Therefore, they are regulated under federal securities laws. This means it must be sold to you with a prospectus to give you a better idea of what you may be getting into.

 

Get Variable Life Insurance Rate Quotes Today

With a better understanding of variable life insurance basics, you may want to get some rate quotes and compare variable life insurance to other whole life insurance plans. You can use our free life insurance rate finder tool to gather multiple quotes from different life insurance companies. This will allow you to choose the right life insurance plan for you while saving you money in the process.

Define Whole Life Insurance