Variable Life Insurance is the most flexible form of Whole Life Insurance. It gives the insured the greatest control over how and where the cash value of the policy is invested.
With Variable Life Insurance, you can allocate a portion of your premiums to separate accounts that consist of different tax-deferred investment funds within the insurance company‘s entire investment portfolio (such as equity, money market or bond accounts).
The cash value and death benefit of the policy may fluctuate based on the performance of your investments, so Variable Life Insurance offers the possibility of more financial reward (and risk). Most policies do guarantee some amount of death benefit, should the investments fall below a specified level.
What Variable Life Insurance Is Not
Variable Life Insurance is at the opposite end of the life insurance spectrum from Term Life Insurance. It is more complex, more flexible, and is both a savings and an investment vehicle.
Keep in mind that Variable Life Insurance isn’t a loan or a bank account that you can draw from any time you like. It is a long-term combination life insurance and investment instrument.
Who Needs Variable Life Insurance?
This type of insurance is for those with the ability and the interest to monitor and manage their policy portfolio closely. Variable Life Insurance is inherently risky, so those who purchase it must have some comfort level with investment risk.
Things To Think About
Most Variable Life Insurance policies are sold with a prospectus, and are regulated by Federal Securities Laws. Do your homework, and find out as much about the investment portfolio as possible.