What is Variable Life Insurance?

Variable life insurance, aside from whole life insurance and universal life insurance, is another form of permanent life insurance. Thus, it is a policy or a contract that can protect beneficiaries when the insured individual dies.

A variable life insurance can be pretty expensive because of its additional benefits, aside from death benefits. In a variable life insurance policy, the policyholder can decide to set aside part of the premiums that he is paying and invest it into a separate account, but still within the same company. The investment account can be in the form of stocks, equity fonds, and even bonds. Because of this, variable life insurance charge higher due to the investment risks involved.

However, a variable life insurance policy can more than make up for that particular drawback. Variable life insurance policies allow you to enjoy the earnings coming from the investments that you make without tax. The earnings are basically yours the moment they add up to your investment, and you can even use the earnings to reduce the amount of your premiums. Thus, this can help lower the amount that you have to shell out every month. The only problem with this is that you won't feel the earnings at all because it will be overshadowed by the rather more expensive premiums that will be charged to you. Another advantage attributed to variable life insurance is that there is no limit as to how much you can invest.

There is, however, an inevitable danger to having a variable life insurance policy. Since the earnings you get are based on interest on your investments, which is vulnerable to a lot of factors, the earnings can also fall, which means that you don't get anything extra. This can also have an effect on the value of the death benefit that beneficiaries will receive. Thus, to avoid being surprised by unexpected situations such as these, be sure not to depend solely on the earnings to pay off the premiums. You still need to make sure that the rate of your premiums is fairly within your paying ability. This will help avoid any payment problems, and even the unexpected cancellation of what is supposed to be a permanent life protection.

Moreover, in most variable life insurance policies, withdrawal is not an option throughout the entire contract, which is, basically, your entire lifetime. However, some insurance companies may differ in this respect. However, those that do offer withdrawal options will deduct the amount you withdraw from the death benefits, which is an obvious disadvantage.

If you need a life insurance policy, think very carefully when you are veering towards a variable life policy. This is a policy that provides obvious advantages, most, if not all, of which come with a price. If you decide to buy a life insurance policy, you should take all the possible factors into consideration, and consider worst-case scenarios as well, because fund performance can greatly affect the earnings you get, the amount you have to pay each month, and the death benefits of beneficiaries. Make sure to shop around and compare various policies before buying one.