What Is Variable Life Insurance?

What Is Variable Life Insurance?

By Charles Joseph | Editor, Financial Affairs
Reviewed by Corey Michael | Senior Financial Analyst

Variable life insurance is a life insurance policy that comes with a built-in savings component that allows for investment in stocks, bonds, and money market mutual funds. The value of your cash and death benefits may fluctuate based on the performance of your investments. This means that the return and value of your policy may be higher or lower depending on how successfully your investment choices perform. While this could potentially increase the value of your life insurance policy, it also carries higher risk and potential loss. This type of life insurance is commonly selected by those who are willing to take on more risk with their life insurance premium to potentially achieve larger returns.

Related Questions

1. What are the benefits of variable life insurance?

Variable life insurance policies offer a higher potential for financial growth than traditional policies. They also includes a death benefit feature which can be a valuable resource for beneficiaries in case of the policyholder’s passing.

2. What are the risks of variable life insurance?

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The cash value of a variable life policy is not guaranteed. If the investments do not perform well, you may end up losing a significant portion of your life insurance value.

3. How is variable life insurance different from whole life insurance?

Whole life insurance offers guaranteed cash value and death benefits, while variable life insurance has potential for higher cash value and death benefits if the investment performance is good. However, these values may decrease if the investments fare poorly.

4. Who should consider variable life insurance?

Variable life insurance is best for individuals who are comfortable with investment risk and want to have a certain level of control over their policy’s cash value growth.

5. Can you lose money on variable life insurance?

Yes, if the investments tied to the policy perform poorly, the cash value and possibly even the death benefit can decrease. However, many policies do offer a minimum death benefit.