Importance of Variable Life Insurance Products
Introduction ď ˝
It is important to understand the characteristics of variable life insurance products before investing. Each of these products offers a saving feature to their policyholders. Aside from insurance company fees, the premiums go into the balance of the policy. This allows a growing cash value to the policy.
Variable Life Insurance ď ˝
Variable life is actually a type of permanent life insurance coverage. This type of policy offers one component for permanent death benefit proceeds whereby funds will be available to a beneficiary (or beneficiaries) for paying off final expenses and other financial needs of the insured’s survivors.
Why Purchasing a Variable Life Insurance Policy
Fixed Premiums Guaranteed Death Benefit Tax Deferral Investment Variety Ability to Borrow
Fixed Premiums ď ˝
One big advantage to owning a variable life insurance policy is that the premium amount is usually fixed. Therefore, in most cases, the policy holder will not need to worry about rising premiums in the future.
Guaranteed Death Benefit
Even though fluctuations in the market can affect the value of the policy’s investment component, the death benefit amount that goes to the policy’s beneficiaries is guaranteed.
Tax Deferral ď ˝
As with other types of permanent life insurance, the funds in the underlying investment account are allowed to grow on a tax deferred basis. This can help these funds to accumulate faster than if they were taxed on an annual basis.
Investment Variety ď ˝
This differs from other types of permanent insurance such as whole life where the insurance company chooses the underlying investment allocations, as well as the interest rate that is offered to the policy holder.
Ability to Borrow ď ˝
In many cases, the funds that are in the investment component of a variable life insurance policy can be borrowed by the policy holder at little or no interest. In addition, oftentimes the cash value can also be used for paying future policy premiums that are due. This can alleviate the policy holder from having to pay premiums out-ofpocket if they so choose.
Importance of Variable Life Insurance ď ˝
It is important to understand the characteristics of variable life insurance products before investing. Each of these products offers a saving feature to their policyholders. Aside from insurance company fees, the premiums go into the balance of the policy. This allows a growing cash value to the policy.
Control of Policy Holder on Investment ď ˝
Another important characteristic of variable life insurance products is the policyholder has control over where investment the cash value of the policy goes. Most of these products offer a wide range of investment options to the policyholders. This allows the policyholder to distribute the cash value over a range of investments to minimize risk and maximize return.
Management Fees ď ˝
Because the policyholder can indicate their investment preferences, the insurance company must handle the transactions. In exchange for that, the insurance company will charge management fees. That comes out of the premiums going into the investment.
Who I Am? ď ˝
Randy Becker Bellevue is a Retirement Planning Professional at Becker Retirement Group who specialize in insurance products, such as fixed annuities and a variety of investment products that will help you build financial strategies.