Variable life insurance policy has an important investment component that distinguishes it from other insurance policies.
Life insurance policies give financial protection to policyholders and their families, and after paying premiums over time, there is guaranteed money when the insured dies.
There are a number of life insurance policies: whole life, term life, universal life, variable life insurance etc. There is a slight difference in all of these policies that try to accomodate all kinds of clients that come for insurance; the main aim is always giving financial protection to policyholders and their families after they die.
One example is variable life insurance policy. Let’s see what it is and how it works.
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What is Variable Life Insurance?
Variable life insurance is a kind of whole life insurance that provides permanent protection; apart from having a guaranteed death benefit, this kind of policy has separate accounts which have designated investment funds and instruments.
There is a cash value component as well which the policyholder can borrow or withdraw to use during their life too, tax-deferred.
It is important to note that there are specific investment funds in the variable life insurance policy that you can put your money into, such as bonds, S&P 500 index, equities like emerging market funds and even a money market fund. Sometimes this investment component also allows you to pay all remaining premiums upfront!
Just like any other performing investment, this also comes with a lot of investment risk, loans and poor investment performance may lead to a decrease in cash value, and lose part of your initial investment. But still, an insured usually chooses variable life insurance in order to be in control of their investments and to have a Variable life insurance death benefit along with lifetime coverage.
Variable Life Insurance Pros and Cons
Variable life insurance is very popular within Americans, but like every other policy, it also has its own share of pros and cons. It all depends on what you’re looking for in a policy and whether the pros or cons work more for you.
- Variable life insurance death benefit
- Suitable investment options
- Growth potential
- Fixed payment
- Lifelong coverage
- Greater investment risk
- Cash value is likely to decrease if investments don’t perform well
- Cash value is NOT guaranteed
- Complicated than a whole life or term life insurance policy
Weighing the pros and cons thoroughly is very important before deciding if this is the kind of policy that is best for you and your family.
Variable Life Insurance is based on what kind of Premium?
A variable life insurance policy is based on level-fixed premium.
A level-fixed premium remains constant throughout the policy, while the amount of coverage increases. This is mostly in a term life policy, whereas in a whole life policy as the cash value component increases, premiums decrease.
Every time a premium payment is made, portion of it goes to the cost of insurance and the cash value. This is important to keep the death benefit in place, and of course, with regular payment of premiums, the policy remains in force.
Variable Life Insurance Policy Rates
The following rates are compiled considering a healthy non-smoker male and female looking for a coverage of $250,000. Here is what the quotes might look like:
($ per month)
($ per month)
|25 – 35||$100 – $140||$78 – $120|
|35 – 45||$140 – $221||$120 – $201|
|45 – 55||$221 – $364||$201 – $340|
|55 – 65||$364 – $659||$340 – $571|
Note: Sample rates have been extracted online, courtesy of SmartAsset.
Variable Life Insurance Companies
Looking for the best variable life insurance company can be challenging, and often a chaotic process. To ease you of the hassle, we have created a list of the most authentic insurance companies for choosing a variable life insurance plan.
- Variable Annuity Life Insurance Company (VALIC)
- Equitable Variable Life Insurance Company
- Prudential Variable Life Insurance
- Hartford Universal Life Insurance
- John Hancock Variable Life Insurance
All of these companies have experience of a lot of years and make sure that customers get the best policy according to their needs.
Level-fixed premium for a variable life insurance policy ensures that the premium remains constant throughout. A variable life insurance policy works for those who are looking for an investment component with their policy along with the cash value and death benefit.