What are the benefits of variable life insurance

Life insurance policies have gone through a conspicuous metamorphosis with new products being introduced in the market to cater to the needs of the most discerning customers. The sheer number of products and services available today can make choosing one a mind boggling prospect. The advantage of this situation is the fact that there is an insurance policy that is just right for the needs of almost every customer. So chances are that you will find a policy that suits your requirements. One among the several types of coverage available today is variable life insurance. Here is some information on this type of coverage:

What is variable life insurance

Variable life insurance is a form of permanent insurance coverage that does not expire as long as you continue making your premium payments. It is akin to other forms of permanent life insurance in this respect and varies from term life insurance policies that expire at the end of a specified duration. Variable life insurance also shares another feature with other forms of permanent life insurance coverage, it has a built in investment component where the cash value is accrued because a part of the premium is allocated for investment in various funds.

This type of policy has an edge over traditional universal life insurance coverage because in variable life insurance the buyer can decide where the funds are invested as opposed to this in a traditional universal policy the buyer has no control over the types of investments. As the value of the underlying investments grow so does the cash value and this gain is not taxable until the policy is surrendered. The interest earned on the cash value can be used to make the premium payments potentially lowering the cost of the insurance policy for the buyer.

But if there are pros to the deal there are bound to be cons as well. Since the accrued cash value is invested in various funds, when the value of the investment fund plunges, the interest on the cash value also goes down and hence less money is available for premium payments. This means that you may have to pay from your pockets to keep the policy in force. Another negative aspect of this type of policy is the reduction in the death benefits or policy payouts depending on the value of the investment fund but the value will never go below a certain minimal amount. Also withdrawal from cash value is not allowed during the lifetime of the policy holder. So your family may get less than the anticipated amount in payouts.

It can be safely suggested that variable life insurance is not everybody's cup of tea, unless you have the capacity to tolerate a certain amount of risk, this may not be the right policy for you. However many buyers like to have control over the investment options and feel secure when they are calling the shots in terms of how and where the money is invested.