Variable life insurance is another form of permanent life insurance. However, it is unique in that while it is a riskier option, the potential on your cash back values and coverage are far greater. Variable life insurance is defined by the government as a ‘securities contract,’ and subsequently will be regulated by federal securities laws and sold only via a prospectus. As a result, you need to understand every aspect of your plan, as you will allocate portions of your premium dollars amongst varying investment avenues.
Positives Variable Life Insurance
• Your beneficiaries will receive permanent protection, coverage and benefits upon the policyholder’s passing on.
• The cash values of your policy have the potential to grow exponentially, leaving your beneficiaries with great comfort, as well as opportunity for them to continue growing financially on those investments.
• Your premiums are not fixed! Because there are different avenues to accrue cash value throughout your policy, those can be used to make up the difference in what you pay out of pocket for the premium, So, dependent on your current cash flow and the terms of your plan, you may change the amount you pay out per month.
Negatives Variable Life Insurance
• Where there is potential to gain, there is also potential to lose. This policy involves many different avenues for investment, such as stocks, bonds, equity funds, money market funds, and bond funds. If any of those are not performing well, you may need to add additional premiums to affirm the beneficiaries will receive proper coverage.
• Due to the investment nature of this policy, it can be difficult to plan for a precise amount of cash value to be allotted to your beneficiaries.
• This type of insurance is generally more expensive than term or permanent insurance due to the nature of your premium dollars being accrued through varying investment channels. Essentially, because of the investment nature, there is no 100% guarantee of your cash value, so a higher premium may be necessary to cover potential loss.
