Life insurance is a type of insurance policy that pays your dependents when you die. It can be a good way to take care of your spouse, children and other loved ones — especially if they rely on your income to get by.
When choosing a life insurance policy, there are many types to consider. Variable life insurance — which also contains an investment component — is one such option.
If you are in the market for life insurance, or just want to enhance the protection you already have, now is the time to act. Getting a quote is a great first step.
Here’s what you need to know about the benefits of variable life insurance.
What are the benefits of variable life insurance?
Variable life insurance policies have several advantages. They offer:
- Premium and benefit flexibility: You have the option of using the cash value of your policy to cover your premiums or increase your death benefit.
- Development: Variable life insurance policies give you an opportunity for growth. You can invest your cash value in various securities and stocks, which allows you to grow your account and death benefits over time.
- Access to funds: With variable life insurance, you can borrow against the cash value of your policy or even withdraw from it. This gives you access to cash if an emergency arises or you simply need extra income retirement.
- Tax benefits: Cash value accounts in variable life insurance policies are tax-deferred, meaning you’ll only pay taxes when you withdraw money. Your beneficiaries will also pay no taxes on the payment they receive when you die.
Variable life insurance policies are also permanent, meaning you’ll have protection for your entire life, regardless of when you start your policy. Other options such as term life insurancefor example, they only last for a limited time (typically 10 to 30 years).
If this type of policy sounds beneficial, then start now. A life insurance expert can help you create a policy that works for you and your family.
What is variable life insurance?
When considering variable life insurance, it’s important to understand exactly what it is. Variable life insurance is a type of permanent life insurance designed to last a lifetime. It offers a lump sum payment to your beneficiaries when you die, while also giving you access to a cash value account while you’re alive. This account can earn interest, invest in the stock market or various other securities, and borrow against. You can also withdraw cash from it.
With variable life insurance policies, both premiums and death benefits are adjustable, so when the cash value of your policy reaches a certain point, you can use the balance to reduce or even cover your premiums entirely or increase or decrease the death benefit as required.
How does variable life insurance work?
When you have a variable life insurance policy, you’ll pay monthly premiums — a portion of which will go toward the death benefit (what your beneficiaries are paid when you pass) and a portion of which will go into the policy’s cash value account. There are also sub-accounts, which allow you to invest your cash value in the stock market or other investments and potentially grow your wealth.
Once you pass it on, your beneficiaries will receive a lump sum death benefit based on your policy and the cash value you’ve built up to that point.
Variable life insurance is not right for everyone. Here are some other considerations to note:
- They are risky: Investing is inherently risky and depending on your investment decisions, you could lose money as a result. There is also risk if you start using the cash value of your policy or borrowing against it.
- They are practical: Variable life insurance policies require you to be involved in managing your account and your investments. You will need to choose your investment vehicles and actively monitor the growth of your cash account over time.
- No guaranteed death benefit: There is no set death benefit with variable life insurance policies. Instead, the payout will depend on your investment decisions and the value of your policy when you pass.
There are pros and cons to each type of insurance policy, so if you’re not sure which one is right for your needs and budget, talk to an insurance professional. They can help you determine the best coverage for your unique situation.
How much does variable life insurance usually cost?
Variable life insurance premiums vary by insurance provider, and other factors, such as your age, health and more. To make sure you get the best price, shop around and compare your options. An insurance broker can also help you compare potential insurers if you’re not sure where to start.