Variable Life Insurance

Insurance Quotes -> Life Insurance -> Life Insurance Policy Types -> Variable Life Insurance

When shopping for life insurance, it is better to think of companies like car dealers. We may all need transportation but we all don’t need to get there in the same vehicle. That is why life insurance policy options are varied and can accommodate a variety of needs, both short and long term.

Options

Just a few of the options available are:

• Term Life Insurance: Policy holder determines amount of coverage and length of time required and insurance company provides a quote based upon information provided on application. If payments are missed or if the coverage lapses for any reason, all money paid into the policy is forfeited and a new policy will need to be written in order to have life insurance again. May be bought in increments of up to 30 years and tend to be relatively inexpensive. The face value of the term life insurance policy is paid to the beneficiary.
• Joint Life Insurance: Purchased in conjunction with co-policy holder and payout occurs either when one partner becomes terminally ill or passes.
• Whole Life Insurance: involve both the traditional life insurance aspect and payout to a named beneficiary but also involve an investment component. Part of the premium amount is set aside to cover the expenses of the life insurance coverage and part goes towards investment options offered by the company. Typically, whole life insurance policy investment options are set up much like a mutual fund and are a conglomeration of various investment tools such as stocks, bonds, commodities, and money markets.

Variable Life Insurance

Variable life insurance is actually a type of whole life insurance. Like other life insurance options, variable policies have the typical benefits that are paid to a named beneficiary in the event of a policy-holder death. Also, like a whole life insurance plan, variable policies also involve an investment component which is factored into the premium pricing—but they come in two varieties.

Varieties of Variable Life Insurance

The first variety of variable life insurance involves a fixed premium amount where a designated percentage is applied towards the actual insurance and the remaining amount is applied to investments. Again, there are a variety of investment vehicles to choose from and this type of policy with the fixed premium amounts is commonly marketed as a retirement account. If set up properly, the taxes are deferred until the policy is exercised in some form giving the insured the ability to maximize investment value.

The second type of variable life insurance offers variable premiums as is typically found with universal life policies. The returns will fluctuate along with market forces and thus can seriously affect the cash value of the policy when conditions are volatile. This is why this variety of variable life insurance may not be the best option for investors who may have need of reserve funds in the near future. For people with acceptable reserves of liquid assets, this variety of variable life insurance may be a good option giving them the potential to save on premiums but having the resources to absorb losses and higher premiums should market conditions take a turn for the worse.

Making a Decision

In cases where cash reserves are not at a comfortable point but a person still wants to invest while having the security of life insurance, a term policy may be a better option. Term life insurance is less expensive so the premium amounts are lower but there is still the security of knowing that beneficiaries will be covered in case something happens. With the lower premiums, a person can then invest in a mutual fund which has can be accessed easier and with less expense than a variable life insurance policy.

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