Variable life insurance
Variable Life Insurance is also called Variable Appreciable Life Insurance. It provides permanent protection to the beneficiary on the death of the policy holder. The reason for terming this as variable is that it allocates a portion of the premium to a separate account for investment of the amount into the companys investment portfolio. Therefore, the value of death benefit may vary subject to market fluctuations.
The advantages of variable life insurance are:
There is no limitation on the amount of investment.
You can participate in various investment options without being taxed.
The disadvantages are:
The premiums eat away into the gains.
Poor market performance may decrease the value of the fund.
Cash values cannot be withdrawn in your lifetime.
Withdrawals from a variable policy will reduce the death benefit.
When the investment funds perform poorly, less money is available to pay the premiums.
If you withdraw more money than the premiums you paid into the policy, you will have to pay income taxes on the difference.
Variable and universal insurance policies combine a death benefit with an investment that can be allocated among one of the investment options. The premiums include the cost of insurance, mortality and expense risks and administrative risks that reduce the cash value of the life policy.
The life plan provides permanent protection to the beneficiary upon the death of the policy holder. It is considered the most expensive cash value insurance as it allows you to apportion some of the premium for investment.
This policy combines life insurance with an investment account and provides access to the cash value. Variable life insurance policies are sponsored as college savings plan.
Variable Universal Life is regarded as a type of permanent coverage as the death benefit will be paid to the nominee or the beneficiary if the policy holder dies anytime till the age of endowment, i.e., 100 years. The payment is made as long as there is sufficient cash value in the account.
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