Variable Life Insurance is a type of permanent life insurance policy that combines life insurance protection with an investment component. The policyholder can allocate the cash value portion of their policy to a variety of separate accounts, which can include stocks, bonds, money market funds, or other investment instruments. The value of the policy’s cash value and death benefit can vary based on the performance of the investments chosen.
Unlike traditional whole life insurance policies, which offer a guaranteed cash value and death benefit, the potential for higher returns with variable life insurance comes with a greater risk. If the investments perform well, the policy’s cash value and the death benefit may increase. Conversely, if the investments perform poorly, the cash value and the death benefit may decrease, although some policies do guarantee a minimum death benefit.
Policyholders of variable life insurance have the ability to adjust the policy’s premiums and death benefits within certain limits. This flexibility allows the insured to alter their coverage as their financial needs change over time. However, due to the investment risks and the complex nature of variable life insurance, it is often recommended that prospective buyers seek the advice of a financial professional before purchasing this type of policy.