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 and rates on life insurance visit www.grouphealthplans.com .
