Variable Life Insurance Author:    Posted under: Life InsuranceLife Insurance Types

Variable Life Insurance is also known as Valuable Appreciable Life Insurance. This specific type of life insurance provides protection to the beneficiary upon the death of the policyholder. The Variable Life Insurance has fixed premiums but also allows you to invest in different investment funds within the insurance company. That’s where the term “variable” comes in.  The policyholder can either invest it in equity funds, money market funds or bond funds. The good thing about this is that you can invest and not be taxed on your earnings until you surrender the policy.

Having to pay fixed premium guarantees that the beneficiaries will get at least the minimum death benefit regardless of what happens on the investment portion of the policy. It is also permissible to use the interests on the investment earnings to pay a part of the premium thus lowering the amount you have to pay. With the variable life insurance you are also assured that the insurance company will not increase the amount of fixed premium you pay. However, since it is part insurance and part investment, the value of the death benefit may fluctuate from time to time depending on the performance of the investment portion of the policy.

The major disadvantage of Variable Life Insurance is that you assume the investment risks. If, for some reason, the investment fund does not do well or performs poorly, chances are there will be less money available to pay for premiums making you responsible to pay for the premium out of your own pocket. And also you may have to pay more than you expected just to keep the policy in force.

Another disadvantage of Variable Life Insurance is that you cannot withdraw from the cash value during your lifetime.

Variable Life Insurance is a form of Whole Life Insurance. It is also considered as a securities contract because of investment risks. Being as such it is regulated as securities under the Federal Securities Laws and must be sold with a prospectus.

As always, you must consider the risks, charges, expenses and investment options before purchasing a Variable Life Insurance. Read and study thoroughly any information about the product before making a decision.


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