Variable life Insurance policy is one in which the bulk of the premium amounts is invested in one or more separate investment accounts. The investment options have variety of variations which include fixed income investments, stocks, mutual funds, bonds etc. With such type of insurance you can get permanent life long protection. The word “variable” indicates that one can divert a portion of premium hard earned money into separate account such as equity fund, bond money, and money market fund. With such type of insurance one can have:
- Guaranteed minimum benefit
- The premiums will never change
- Equity which you’ve built up through payments can also be reinvested
- Earnings in the cash value portfolio are tax deferred with which the portfolios can be transferred without penalty.
- Portfolios have a minimum return which would provide one with guaranteed growth.
The variable life insurance as per the policy updates may fluctuate with up rise or drop down of the performance of investment part at any point of time. Many policy holder specify that the death benefit doesn’t fall below a minimum amount, but rarely an insurer will give you minimum cash value. This type of insurance is similar to whole life insurance, the risks of whose investments are considered as a securities contract.
Many people opt for variable life insurance because it will enable one to participate in various investment options without having to be taxed for their earnings. You would also get lower premiums by applying interest earned on the investment towards them. The ability to make more money is one of the best factors behind buying variable life insurance.
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