Variable Life Insurance

Summary

A variable life policy allows the policyholder to select the mutual funds in which the cash value is invested. When this feature is added to a policy that is otherwise similar to a whole life policy, it is called variable whole life. Similarly, a policy with flexibility in both policy terms and investment choices is called variable universal life. Variable life can be a good choice for individuals who need permanent insurance and who prefer to manage their own investments.

Variations

Policies generally have the same basic structure. The differences are in the options you have and when these options can be excercised. Variable life products are complex financial instruments that are regulated by the Securities and Exchange Commission. Every proposal for variable life must include a prospectus on the fund options being offered and must be presented by a registered representative. Comparison of all of the different options available in variable life insurance policies is beyond the scope of this review. We recommend you contact your financial advisor for additional information about variable life insurance.

Advantages

There is no clear cut advantage or disadvantage to one type of permanent insurance over another. Each type has its appropriate use. Whole life offers more security than other types of permanent insurance but has less flexibility. Many buyers of whole life insurance are attracted by the convenience of one fixed cost product that guarantees their lifelong insurability, creates a safe and secure emergency fund, and provides liquid assets to their heirs. Buyers of universal life like the flexibility of a policy that can start out with modest premiums and benefits, increase as their family grows, provide a source for college funding, then be scaled back during the "empty nest" years. Buyers of variable life are more comfortable making their own investment decisions rather than having the insurance company choose the investments.

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