DO YOU NEED VARIABLE LIFE INSURANCE?

There are many types of life insurance policies. They all vary in structure, term, premium and various other factors depending on what type of life insurance polity it is. Variable life insurance is one of the most expensive policies. It has high premiums. It is also called as permanent life insurance policy. That’s because the beneficiary gets permanent protection up on the insurer’s death.

This type of policy is called “variable” because it allows you to allocate or invest a part of your premium money on different investments funds or sub-accounts in your policy or which is available within the insurance company’s portfolio. It could be anything from money-market fund, an equity fund or even a bond fund. It is similar to mutual fund; the only difference is that it is available within a variable life insurance policy.

The insurer gets to choose from different sub-account options in variable life insurance policy. Some insurance companies even offer up to 50 different options. One needs to have good knowledge about different types of investment accounts and their benefits in the long run as they are all related to market value. If you do not have sound knowledge about investment then consult an expert in financial investments. Many insurance companies offer their guidance as to which sub account would be a better option in the prevailing market situation.

Variable life insurance policy is a great way to secure one’s life and their family. But before investing on variable life insurance policy one should be aware of the market situation. If the markets are dropping consistently then a variable life insurance policy would not be the best option for investment. The cash value account grows with the growth in the sub-account within the policy. Similarly it will drop when the sub-account investments drop.

Most people go for variable life insurance policy because of its possible benefits in the investments available in the policy. Moreover, it is an excellent non taxable investment. The insurer does not get taxed for the annual growth of cash value account as an ordinary income. Variable life insurance policy also comes in handy when taking loans. The insurer can use the cash value account as collateral. They may be exempt from any income tax if they use the account as collateral instead of direct withdrawals.

The insurance company will present with the prospectus which includes details of all policy charges, fees, sub-account expenses or any other charges when the insurer is interested in a variable life insurance policy.

One small drawback of the variable life insurance policy is that the insurer is not given an accurate value of death benefit to their beneficiaries. This is because variable life insurance policy delves on market situation. It is bound to fluctuate depending on the performance of the investment portion of the variable life insurance policy.

So if one is looking for a great tax benefits with number of investment options within the policy then variable life insurance is the best choice. One can also forward the interest earned on these investments against the premiums which automatically lowers the amount paid as premium in variable life insurance policy. If one is game for investment risks, then variable life insurance is a perfect policy.