Advantages / Disadvantages of Variable Life Insurance

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.