Is Variable Life Insurance for You?

Variable life insurance is a type of permanent coverage that allows you to choose your own investments. With the right investing know-how, you could profit considerably from this freedom. But use caution!


This page:

Describes variable life insurance.

Explains the pros and cons of variable coverage

Makes clear who benefits from variable life insurance

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How variable life insurance works

Permanent life insurance with the freedom to control your investment portfolio is called variable life insurance.

Generally, variable life insurance is the most expensive type of cash value insurance. This is because unlike whole life insurance, variable life insurance gives you complete control over your investments - be they stocks, bonds, or money market funds.

The number of times you can change and update you investment portfolio is usually unlimited, although this is something you will need to confirm with your insurance company .

Because many of the benefits of variable life insurance are wholly dependant on your ability to invest successfully, you should be absolutely certain that you understand all implications before purchasing this type of policy.

The pros and cons of variable life insurance

With the additional freedom of variable life insurance comes increased risk. Because your policy's cash value depends on the investments you make, your insurer cannot guarantee a minimum balance for this part of your policy.

Your insurer will be in no way responsible for your investment decisions, and if your investments perform poorly, you may be asked to forfeit your savings.

However, if you invest well, your cash value gain can be substantial (much more so than with other policy types).

There can also substantial tax advantages associated with variable policies. The cash value portion of the policy is not taxed until the policy is redeemed. These profits, unlike those from standard personal investments, are not subject to capital gains tax even when you change investments - which means they can grow tax-deferred.

Who should buy variable coverage

Only those who are comfortable with their own ability to invest should ever buy variable life insurance.

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If you are good at investing and don't mind the extra cost, variable life insurance is probably the most sound choice for a permanent life insurance policy.

Since the insurance company invests so conservatively you stand to profit much more in the market especially if you know the ropes and invest wisely. And the absence of capital gains taxes can actually make a variable policy and attractive investment method.

Choosing a variable policy

Variable life insurance policies are complex investments and, as with any important investment, it's wise to consult a professional before committing.

For fast personalized advice with the ease of an online service, visit InsureME.. Apply online, and health insurance agencies who offer variable life policies in your area will contact you with quotes and personalized advice.

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