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Benefits of Variable Life Insurance

Life Insurance

Variable Life is one kind of permanent insurance that lets you target your premium to one or more separate investment funds. These could be fixed income investments, or stocks, bonds, or a money market fund. Depending on company policy, you can switch your investments two to five times per year. Unlike universal life, with Variable Life you can control the investment of your cash value.

Variable insurance falls into two general categories, Variable Life and Universal Variable Life. The main benefit of these types of policy is that you, the policyholder is in control, within limits, depending on the company you choose.

One of the main benefits of variable life insurance is that the policy owner has the opportunity to achieve huge gains in the cash value and those gains are tax free to the beneficiary. A Variable Life insurance policy differs from a whole life policy in four main respects:

  • A new concept, the ?separate account' is presented
  • The policy owner assumes the risk for the performance of the policy
  • A minimum guaranteed death benefit is provided based on an ?assumed rate of interest'
  • The product is a security which adds significant new rules and regulations

Like the whole life insurance policy, the insured in a Variable Life insurance policy is required to pay a set premium on a scheduled basis. In the Variable Life insurance context, however, the insurance company places the premium payment into a separate account specific to the policyholder and the policyholder has the responsibility of directing the performance (i.e. investments) of that account.

Although Variable Life policies are generally more expensive than other life policies, they do give the holder more control and flexibility. The potential is there to make very large profits, with tax deferred investment and large tax free lump sums to beneficiaries.

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