Variable Life Insurance
“Variability” is a term which is used frequently in life insurance in many different contexts. In variable life insurance, the term means that the cash value of the policy is managed directly by the policyholder as an investment vehicle. This system has its pros and cons. To determine if variable life insurance is right for you, read on and obtain free life insurance quotes online by entering your zip code.
Types of Variable Life Insurance
Cash value life insurance comes in two different types, both of which may be variable. Whole life insurance requires the policyholder to make fixed payments at certain times, whereas universal life insurance lets the policyholder make premium payments at whatever time and monetary amount they wish. Variable universal life insurance is better as an investment option because it has more flexibility but it also offers more chances to make investment mistakes and the flexible premium could pave the way to defaulting when not done responsibly.
Also, variable annuity life insurance can be a great option for investors looking for insurance features as well as securities or investment options, where after the death of the policyholder, the life insurance policy pays the beneficiary a monthly premium till the cash value is exhausted.
Interest Rates in Non-Variable Life Insurance Policies
A big part of cash value insurance is the policy’s interest rate, which is a large factor in how profitable the investment will be. The various non-variable life policies differ in how the interest rate is managed. Regular whole life policies fix the interest rate for the entire policy term. Non-variable universal life policies have interest rates which are dictated by the insurer based on their wishes. An indexed universal life policy has a rate which is tied to a specific investment market index and is subject to market fluctuations.
- Whole life insurance – interest rates are fixed.
- Universal life insurance – rates are set but can be changed by the life insurance company.
- Indexed universal life insurance – interest rates are tied to a market index, named in your policy.
More Choices With Variable Life
While non-variable cash value policies are directed by an asset manager hired by the insurer, variable life insurance puts the investment decisions in the policyholder’s hands. The policyholder decides where, when and how to invest their accrued cash value within the parameters set by the insurer. In non-variable life insurance, the asset manager is paid a fee for their services; this fee is a percentage of the cash value managed. Policyholders can even put interest earned by their investments toward paying premiums.
Investment Options and Limitations
Policyholders have greater flexibility with variable life insurance but are bound by the parameters set by the life insurance company. The government requires variable life insurers to register their product with the state’s insurance commission, the Financial Industry Regulatory Authority (FINRA), and the Securities Exchange Commission (SEC). Additionally, carriers must specify exactly which investment options they give to the policyholders, and these can’t be deviated from for any reason.
Variable Life Insurance Pros and Cons
Variable life allows the policyholder different investment choices and to not pay taxes on returns until the policy is cashed in. They can lower premiums by directing the interest as they wish, in affect making it “flexible premium variable life insurance”. Also, investors don’t pay the asset manager fees.
However, managing your own investments is risky. Any bad choices can put the policyholder in danger of financial ruin, potentially having the life insurance policy lapse. Negative returns on investments can also decrease your death benefit, but never past a certain point. Cash values can’t be withdrawn during your lifetime.
Variable Life Insurance Quote
Variable life insurance is a valid option for those who feel confident they can direct their own investments. Care must be taken not to make bad investment or money management decision, but sophisticated, qualified investors can benefit greatly from the policy. Take control of your money with a variable life insurance policy.
Input your 5-digit zip code in the box above to begin a variable life insurance quote. TheLifeInsuranceQuote.com helps consumers and investors compare life insurance quotes to find affordable coverage and premiums from the best companies. Life insurance quotes online are free, instant, and easy, ensuring you buy the best life insurance policy available on the market.
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