Variable Life Insurance
Variable or adjustable life insurance
refers to a policy where death benefits & cash values are variable
- your death benefits and premiums vary according to your investment's
performance. The accumulated cash value is directed to your choice
of investment accounts. Investments can include stock funds, bond
funds, real estate funds or a combination thereof.
You have more control over how your premiums are invested, but you are also responsible
for the performance of the policy. When investing, be sure to get a prospectus
from the company and carefully review it. You will have higher death benefits
and cash value if the underlying investments do well. Your benefits and cash
value will be lower or may be eliminated if the investments you chose don't do
as well as you expect.
A great deal of care must be taken with a variable policy. It can be a great
asset to your protection as well as a decent investment. It is interesting to
note that variable/adjustable life is so much like "normal" investing that agents
offering it must be licensed securities dealers and registered with the U.S.
Securities and Exchange Commission. Proper guidance from a seasoned professional
will help you ensure you get the highest possible performance from a variable
life policy.
Pros:
Allows you to participate in various types of investment options while not being
taxed on your earnings (until you surrender the policy). You can apply interest
earned on these investments toward the premiums, potentially lowering the amount
you pay.
Cons:
You assume the investment risks. When the investment funds perform poorly, less
money is available to pay the premiums, meaning that you may have to pay more
than you can afford to keep the policy in force. Poor fund performance also means
that the cash and/or death benefit may decline, though never below a defined
level. Also, you cannot withdraw from the cash value during your lifetime.
Rates and coverage vary form state to state. Shop around on your own and talk
to an independent insurance agent to make sure you get a plan that's right for
you. It's amazing how much rates may vary from company to company for the same
coverage.
For more information
or a quote on whole life insurance, fill out our free
life insurance quote form. |
