April 21, 2021

Variable life insurance is a type of permanent life insurance that offers policyholders a cash value portion of the account. Unlike other permanent life policies, a variable life policy comes with significantly more risk, while presenting the opportunity for more reward. These policies give you the most control over how aggressively you invest the cash value portion of your account, and where you decide to invest.

Learn about the risks and rewards that come with a variable life policy as opposed to other permanent life policies with a cash value feature. Find out how variable life compares in terms of premiums and ongoing costs associated with keeping the policy current. See the pros and cons of a variable life policy, and get help determining the best life insurance solution for your situation. 

Everything You Need to Know About Variable Life insurance in 2021

Variable life insurance is the riskiest of the 4 different types of permanent life insurance that offer a cash value account included in the policy. Variable life insurance, like all permanent life insurance policies, is designed to remain in place for the life of the individual being insured. And, also like other permanent life insurance policies, variable life policies feature a death benefit, a cash value, and the premium.  

What is the Death Benefit for Variable Life Policies?

The death benefit is the most standard element of any life insurance and is the main purpose of the policy. Every month, you pay a premium to keep your life insurance active, part of which goes to the death benefit. When the policyholder dies, the death benefit is bequeathed to a beneficiary. Apart from the administrative fees and that which goes towards the death benefit, the rest of the premium payment goes towards the cash value component of the policy. 

What is the Cash Value Portion of a Variable Life Policy?

The cash value portion of permanent life insurance functions in the same manner as a standard investment brokerage account. The difference with a variable life insurance policy is the amount of investment control and mobility of funds afforded to the policyholder. As the investments appreciate, the policies cash value increases.

If you decide to close your variable life policy at any time, the cash value is the amount you expect to receive back. While the policy is active, the cash value principle is invested in securities that are similar to mutual funds or index ETFs. Most variable life insurance policies include a fixed-interest option that guarantees a steady rate of return to your cash value.   

Why Choose a Variable Life Policy? 

The benefits of choosing a variable life insurance policy include the potential for a higher rate of return on your investment. Variable life policies offer more investment options and flexibility than that afforded by a whole life policy. But, with greater reward potential comes greater risks, and variable policies are so named for that exact reason. 

The cash value portion of a variable life policy most resembles a standard investment account. When the market is good the cash value swells, and when the market ebbs the cash value drains. But, unlike other policies, a variable life policy is built to afford easy access to the cash value. 

Variable policies often include the highest amount of ongoing and additional fees to keep the account open. And, if you are worried about the ability to maintain premium payments, there are more frugal options for getting life insurance. If you want to learn more about variable life insurance, talk to an insurance associate for a free consultation.