FAQ: Who Benefits from Variable Life Insurance?

With variable life insurance, both the heirs and policyholder can benefit. Variable life insurance is a dual purpose policy. One portion guarantees a death benefit to be paid to the beneficiaries while there is an investment portion that can also be used by the policyholder to offset their taxes while building cash value in the form of a nest egg.

How Cash Value Works

The policyholder of a variable life insurance policy can get the flexibility of having a diversified investment portfolio through the large assortment of investment options in the plan. If a rate of return is achieved, no taxes need to be paid (until the policy is surrendered) and the interest earned can be applied directly towards the premium amount due. This lowers your out of pocket expenses required for maintaining a costly variable life insurance policy.

It is up to the policy holder to determine who can benefit from the variable life insurance policy upon their death. Some common choices of choosing beneficiaries include:

  • Spouses
  • Children
  • Other family members
  • Friends
  • Care providers
  • Charities
  • Alma Maters

Other Benefits

It is important to realize that the cost of participating in a variable life insurance policy is significantly steeper than other plans out there. However, by paying more the policyholder can benefit from their policy in a number of ways. As a policyholder, you will have a greater degree of control and flexibility over the funds. Additionally, large profits are not unusual for a variable life insurance investment strategy courtesy of tax-deferred interest. Finally, your beneficiaries can enjoy large tax free lump sums of money.