Variable Life Insurance

When You're in It for the Long Term

Young, and ready to take on the world. This is who variable life insurance is made for. Variable Life Insurance is the greater way to glory, it's a security and an investment. It's much like whole life insurance, but different in that variable life insurance gives you more control over the cash value and death benefits amount.

How Does Variable Life Insurance Work?

With variable life insurance, the premium may go up or down, depending on the status of the market. Part of this payment goes to pay for life insurance. Another part (usually around 4%, but it depends on the policy) goes to build cash value in your "investment portfolio".

As the variable life insurance policy owner, you decide how to invest this money. You can invest in stocks, bonds, etc. As the market changes, so will your cash value and the death benefits. You'll decide how much of your investment is applied to the policy and how much is reinvested. You have more control over this policy than any other, which means you're more at risk. Then again, you have more potential to receive higher benefits when the market is up.

Each company issuing a variable life policy will issue a prospectus, which will define the policy. You should read it carefully before signing the policy. Both the Securities and Exchange Commission and The Commissioner of Insurance regulate these policies, and the agent must have a NASD in order to sell variable life insurance.

What if the Investment on a Variable Life Insurance Policy Goes Bad?

In extreme cases, when the investment choices for a variable life insurance policy loose their value, the policy can lapse, and it will no longer be considered a valid policy. Most companies offer a guaranteed minimum death benefit to keep this from happening. With these policies, the insured must pay a minimum premium each month.

What else does Variable Life Insurance Offer?

Since variable life insurance isn't a strict investment, all the monetary growth within the policy is tax deferrable. This also makes it an easy way to avoid estate taxes. People often purchase variable life insurance policies for their heirs, who can then either withdraw the cash value or borrow against it.

Withdrawing has the same effect it would with a whole life policy. The more cash value withdrawn, the more the death benefits would decrease.

Variable life insurance also gives you the opportunity to make changes in your investment choices without incurring taxes or transaction fees. Most companies limit the number of transactions to about 12 per year.

Most companies will offer a "survivorship" policy. In this case, two people are covered under the variable life insurance policy, and benefits will only be paid when both of them die. This kind of policy helps many people when they could not obtain life insurance by themselves due to health reasons.

Variable life insurance isn't for everyone. Talk to an agent to find out if it's right for you. The opportunity can be huge, but so is the risk, so review all your insurance options before making a decision.

Talk to your Insurance Agent to ensure Variable Life Insurance is right for you!