There are a wide variety of variable life insurance policies available to the consumer in today’s insurance market. Unlike traditional life insurance, variable life insurance comes with a variety of investment options and flexible terms. Also known as Variable Appreciable life insurance, variable policies provide protection to the beneficiary upon the death of the policyholder, but the amount of that benefit will depend on the health of the investments held under the policy. In other words, the better the performance of the investments the greater the benefits will be for the beneficiary.
Variable life insurance is typically the most expensive of all life insurance policies because of the risks associated with managing the policy’s investments. Typically the better the investment performs the higher the death benefit will be. Only a licensed broker may sell a variable policy and the Security Exchange Commission regulates the insurance companies’ investments.
Most insurance companies offer Variable policies that guarantee a minimum payout regardless of the performance of the policy’s performance, though the payout may be fairly minimal. Other benefits to these policies include: The earnings of the variable life insurance investments are not taxed until the policy is surrendered and the insurance premiums may be paid (at least partially) by returns on the investments – thereby lowering or even eliminating payments during boom times. Clearly, the primary drawback to variable policies is the policyholder assumes the risk of the investment.
There are a number of different variable life policies out there. Many insurance companies offer policies within the company’s investment portfolio that may include stocks, bonds, mutual funds, and equity funds. The amount of the premium will depend on your investment choices and a policyholder is generally allowed to allocate a portion of the premium to a variety of these investments.
Be sure to shop around for the right policy and get a clear idea of the amount of risk you’re willing to assume.