Variable Life Insurance

Variable Life Insurance: A General Overview and Important Information on Seeking Death Benefits

Variable Life Insurance is one of many types of life insurance policies available to provide coverage after the individual's death. With variable life insurance, the policyholder has the ability to choose where they want the dividends invested. There are many investment alternatives available through the insurance company that offers variable life insurance. Individuals looking to purchase life insurance have the option to choose between general life insurance and term coverage. The policy an individual chooses will depend on finances and what the person wants to leave for their family later in life.

Advantages of Variable Life Insurance

• This type of policy allows you to choose where you want to invest the money in your life insurance. You can select between investing in bonds, stocks, mutual funds, and money market funds.
• Cash value of the money invested accumulates and is considered nontaxable income.The cash value will accumulate faster if the investment options chosen earn more.
• Rates you pay will not go up because they have fixed rates. The amount you pay when you first sign up will be the rate you pay during the lifetime of the policy you hold.
• The amount of money that will be paid out in the event of the policy maturing will not pay out lower than a specific amount. The people that you leave your insurance payable to after you pass away are guaranteed to receive the amount that you were guaranteed.

How Does Variable Life Insurance Work?

The premium paid in gets distributed between paying for the policy and the amount invested. The portion that is invested is separated into subcategories based on what type of investment you want to invest in. You have the option to invest it all into one type, or you can invest different amounts into stocks, bonds, money market funds, or mutual funds.

Variable Life Coverage: What are the Risks?

The amount that is paid out depends on how much money is invested and the dividends paid on those investments. This means that you constantly have risk on your life insurance. There may be times when the Rate of Return on the amount invested may not be as high as expected and the amount of money invested may start to decrease. The rates will constantly change, but the insurance agency may ask you to pay additional amounts if the cash worth drops too low so that the policy stops declining. The amount paid out after death will be influenced by how good or bad the investment does.

Even though the investments can be risky, they also have the potential to earn a lot more than expected. To prevent your investments from decreasing, professionals recommend that you spread your investments over different types so that if one starts to decline it will be offset by the other.

Additional Information on Variable Life Insurance

• During the lifetime of the policy, the policyholder cannot take funds out of the cash value in the variable life insurance account.
• Policies need to be sold with a disclosure document because they are regulated by the Federal Securities Guidelines.
• The benefit of choosing Variable Life Insurance is that you can choose how you want to invest your money while not being taxed on the profits until the policy is given up.
• The amount that is earned as interest from the investments can be put towards the premiums each month. You may end up paying less during the months that your investments earn a lot.

Finding good rates on Variable Life Insurance Policies

Just like any other type of permanent life insurance policies, variable life insurance policies have higher monthly installments. If you are not sure if you have the ability to pay the installments, term life insurance may be a better option. You can obtain a free variable life insurance quote and learn how this type of policy may be cost-effective for your needs.