Variable Life Insurance Guide


Variable life insurance is another form of permanent life insurance, similar to whole life and universal life – but the difference is that it it offers a wider variety of investment options for the cash value portion of the account. With variable life, policyholders can invest cash in a variety of investment funds, similar to a mutual fund for retirement. This can be a great way to amplify the investment potential of a life insurance policy.

People who want the permanent coverage and guaranteed death benefit of a whole life insurance policy, but who also want to pursue higher growth in the investment component, are a good fit for variable life insurance. Variable life insurance comes with a greater level of investment risk, but also greater upside. Just as with any other investment, variable life assets can gain or lose value depending on market conditions.

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Variable Life Insurance Features

Variable life insurance has the following features:

  • Permanent coverage — Policyholder insured for the full duration of life, not just a fixed period.
  • Variable death benefit — Earn a higher death benefit with market growth. The beneficiary will also at least get back the total amount invested, even if the account has lost money.
  • Fixed premiums — Invest and secure a death benefit with a consistent, reliable payment schedule. Investment options: Diversify investments into a greater variety of asset classes. Set up a custom-tailored investment portfolio. Growth potential --Invest cash value in equities for maximum gains in the long-term.
  • Tax Deferred — Don’t have to pay taxes on the investment profits from the policy until withdrawing the money.

For an in-depth discussion of the above features and term life policies in general, see: Variable Life Insurance Features.

Finding the Best Variable Life Insurance

Variable life insurance policies vary from company to company, and because this is permanent policy, it’s worth the time to shop around for the best one. One of the most important features to watch for is the range of offered investment options. The other crucial factor is the financial strength, reputation and long-term prospects of the insurance company that is selling the policy.

For more advice on finding the best variable life policy in today’s market, be sure to read: Best Variable Life Insurance.

Variable Life Insurance Pros and Cons

Variable life insurance is a true “investment” vehicle in that it offers the possibility of significant long-term gains.The downside of this growth potential is that variable life insurance also contains an added element of risk. Just as stock markets rise in good times, they can also go down. Policyholders who buy variable life insurance policies need to understand the risks they are assuming as investors – they should diversify their investments and be prepared for the possibility of short-term losses as well as long-term gains.

To find out more about the Pros and Cons of Variable Life, check out our Variable Life Insurance Pros and Cons.

Types of Variable Life Insurance

Most variable life insurance policies are similar to whole life insurance, in that they have a fixed premium and a guaranteed death benefit. The other major type of variable life insurance is variable universal life insurance, which combines elements of variable and universal life.

If you’re interested in more details about the different types of variable life, have a look at our Variable Life Insurance Pros and Cons.

Pitfalls of Variable Life Insurance

Variable life insurance, like any other investment you make, has its own set of pitfalls. Luckily they’re easy to avoid once you’re aware of them. The biggest mistake is waiting too long to buy coverage. The second biggest is buying a policy with the wrong amount of death benefit protection. And there are others.

To get a complete discussion of all the common variable life insurance investment pitfalls, visit the Variable Life Insurance Pros and Cons.

Variable Life Insurance Advantages

The biggest advantage of variable life insurance is that it is a true “investment vehicle” that works similarly to a mutual fund. With this policy, insurance insurance premiums make a long-term investment in stock and bond funds for future growht. Policyholders who are willing to assume the investment risks might be rewarded by bigger growth in their cash value over time.

For more details, refer to Variable Life Insurance Advantages.

Variable Life Insurance Performance

When buying a variable life insurance policy, look at the financial strength and reputation of the insurance company selling the policy, and ask for a detailed prospectus on the performance of the variable life insurance cash value accounts. Policyholders should research the funds that their cash value will be invested in, and determine if the variable life insurance policy is a good fit with the rest of their investment portfolio.

For more details on the performance of variable life, refer to Variable Life Insurance Performance.

Variable Universal Life Insurance

Variable universal life insurance offers the best of both variable life insurance and universal life insurance: it delivers the flexibility in premium payments, cash value and death benefit amounts that come with universal life insurance, while also providing variable life insurance’s potential for higher growth in the cash value account.

For more details, refer to Variable Universal Life Insurance.

Who Should Buy Variable Life Insurance

Variable life insurance is a good option for people who want permanent life insurance coverage, a guaranteed death benefit, and maximum growth. Buyers of variable universal life insurance need to have a higher risk tolerance and a greater willingness to manage a more complex life insurance policy. This policy also serves as an efficient estate planning vehicle.

To get a free comparison of life insurance products with quotes from the best companies, contact a licensed insurance specialist. Start Now.