Variable Life Insurance

Variable Life is a form of permanent or whole life insurance with a guaranteed minimum death benefit, fixed premiums and investment control.

Your policy includes a cash value amount which can be built over time through interest and investment returns.
You can invest the bulk of your premium through your insurer’s subaccounts. Many insurers offer a wide variety of asset classes including stocks, bonds, mutual funds, money market funds and fixed-income investments.
Insurers guarantee a minimum death benefit amount, regardless of investment performance.
The death benefit fluctuates according to how the investments are performing, but never below the minimum guaranteed death benefit.
The individual investments are supervised by professional investment managers of the insurer, managing but not eliminating the risk.
The cash value is generally not guaranteed because it can be wholly depleted by poor investment outcomes.
The investment risk lies with the policy owner.
If sufficient cash value has been built up, you can borrow against the policy. However, because the cash account is volatile, the amount you can borrow is limited by the policy.
Surrendering the policy incurs surrender fees, also called deferred sales charges.
These policies are deemed as securities under federal Securities Law. They must be sold with a prospectus.
Poor investment performance affects the amount available to pay premiums, which means you may need to increase payments to maintain the policy, which you may not be able to afford.

Guaranteed permanent coverage and minimum death benefit as long as minimum premiums are paid.
Control over investing your cash value in a wide variety of asset classes. Each insurer will have its own different types of subaccounts.
Potentially higher returns, depending on your choice of investments.
The investments build tax-deferred earnings until the policy is surrendered.
Moving money between subaccounts does not generate capital gains tax.
Interest earned can be used to pay all or part of your premiums, depending on investment performance.
You can borrow against the cash value. These loans do incur interest.

You assume all risks associated with investing.
Volatile cash value and death benefit amounts.
The guaranteed minimum death benefit means higher premiums.
This type of policy needs to be properly funded, especially if the market dampens and you lose your cash value. In such circumstances you must keep up with minimum premium payments, otherwise the policy will lapse.
Unlike universal and whole life policies, you cannot withdraw from the cash value whilst the insured is alive. You can only borrow.
The investment component is often more expensive than various taxable accounts from many major mutual fund companies.
It’s very easy to use these types of policies inappropriately due to their complexity.
Loans against the policy deviate from the investment plan, affecting growth of the cash value and reducing the death benefit if left unpaid.

No Load Life Insurance