Compare Life Insurance: Whole vs. Variable

Posted in Compare Life Insurance , Life Insurance , Life Insurance Quotes , Permanent Insurance , Universal Life Insurance , Variable Life Insurance , Whole Life Insurance

April 27th, 2009

When comparing life insurance policies, you may find yourself having to choose between whole life and variable life. If this is the case, it’s good to know as much about the two types as possible so that when the time comes to choose, you’ll be well-informed.

Permanent Life Insurance

In case you were unaware, both whole life and variable life, like universal life, are forms of permanent insurance. With this type of policy, in addition to receiving a benefit that will be paid to your beneficiary upon your death, your policy also comes with a savings component that allows you to make investments. So instead of simply paying your premium every month to accumulate enough to pay out to your loved ones, you are also investing in a money market security, mutual fund, bond, or other form of investment.

Both are permanent life insurance policies, making them similar. Now, let’s take a look at what makes them different.

Whole Life Insurance

When taking out a whole life policy, it comes with some unique features. Let’s take a look at what they are:

• Fixed premium. With this type of policy, you pay a fixed premium that is guaranteed for the life of the contract. For some, this doesn’t work, because you can’t increase or decrease it at any point. You instead have to purchase a new policy.
• Minimum death benefit. You are guaranteed a minimum face amount, no matter how long you live as long as the premiums are paid.
• Investments. Your premiums are invested in the company’s general account. Some don’t care, however, for the lack of flexibility in investment opportunities.
• Cash value guaranteed. The minimum cash value for your premium investments is guaranteed.

Variable Life Insurance

When comparing insurance policies, it’s good to see the differences in variable life:

• Investment flexibility. Unlike with the whole life policy, your investments are flexible, allowing you to invest in multiple portfolios.
• Cash value. When purchasing this policy, it’s good to know that your cash value is not guaranteed.

Other elements of these two policies are very similar. So if you know that investments are important to you, then it’ll be up to you to decide whether the whole life or variable life is right for you.

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