Advantages / Disadvantages of Variable Life Insurance
Posted in Life Insurance , Variable Life Insurance
September 15th, 2009
If you are investigating options toprovides more layers of financial protection for your family, friends or even favorite charity upon your death, a variable life insurance policy may be for you. The reason why it is called “variable” is when you pay your premiums towards your policy, a portion is directly allocated to an investment portfolio managed by the insurance company and is subject to market fluctuations. Those market fluctuations make the cash-value of the policy variable, while the death benefit is guaranteed.
Advantages of Variable Life Insurance
- The death benefit is guaranteed
- Great financial gains can be made if market changes are positive
- You will not be taxed on the earnings invested into this type of insurance
- Earned interest can be applied towards the premium amount due, thus lowering the out-of-pocket expenses you must pay
- There are generally a large range of financial opportunities offered by the managing company
- It is a financially flexible account
Disadvantages of Variable Life Insurance
- Variable life insurance is extremely expensive
- If the market is in decline, the cash value of the investment can be lost
- You, not the insurance company, assumes the investment risk
- If the investment does not perform well, premium costs will have to be paid out-of-pocket to maintain the policy
- If the fund performs poorly the cash value and death benefit may decrease
If you are interested in investing in a variable life insurance policy, it is important to weigh the pros and cons before committing. Speaking to a specialist in the life insurance industry will prove to be extremely beneficial in helping you figure out your strategy as policies can be complex.