An Introduction to Variable Life Insurance
Variable life insurance is a type of permanent life insurance. It accumulates a cash value that is subject to tax benefits; and can be borrowed by the insured. It is different from whole and universal life because premiums remain fixed; and the insured has control over where the cash value is invested. Once the cost of insurance has been deducted from the premium the remainder is spilt into sub accounts. This is then invested by the insured, according to their preferences, into shares, stocks and/or bonds from the insurer’s investment portfolio. Funds invested may be moved about within this portfolio. The insured can decide to take on high or low risk investments.
Variable life insurance policies may be interest sensitive, market sensitive or a combination of both. Rates of return are always variable. The cash value and death benefit fluctuate in line with the stock market. If the performance of the selected investments is good, the cash value and death benefit will increase. However, if investments fail to perform well, they will decrease. For an extra cost a policy will guarantee a minimum death benefit, however due to the investment risk it is not usual for the cash value to be guaranteed. The tax benefits may be of particular advantage to individuals with a high estate value. However, whilst the great freedom that variable life insurance entails may lead to great gain, it may also lead to great loss. It follows that such a policy is best suited to a competent investor. But whatever you choose, you should always keep a walk to different providers and compare life insurance quotes.
A variable life policy should be the subject of thorough research before a decision to purchase is made. Protected.co.uk is a good place to find the latest insurance articles and new updates on life insurance.
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