A variable life insurance policy is a type of insurance that allows the policyholder to invest in several types of securities. This type of insurance provides a death benefit to the beneficiary of the insured as well as builds a cash value. A variable life insurance policy is known as one of the most flexible types of life insurance coverage available.
The variable life insurance policy is a variation of whole life insurance. This means it is considered to be a permanent type of life insurance that is never going to expire as long as the premiums are paid. Regardless of the health of the insured, the policy is going to remain in effect for the life of the policyholder.
This type of life insurance provides a death benefit to the beneficiary of the individual who purchased the policy. The death benefit is equal to the face value of the policy. For example, if the insured purchased a $1,000,000 US Dollars (USD) policy, the beneficiary of the policyholder would receive $1,000,000 USD upon the death of the insured.
In addition to providing a death benefit, the variable life insurance policy is also going to accumulate a cash value. The cash value is dependent on the performance of the investments which are chosen by the insured. Part of the premium payment is going to go into subaccounts selected by the policyholder.
These subaccounts are very similar to mutual funds. There are different fund choices for the insured to choose from. Some of the funds might be based on investing in growth stocks, while others invest mainly in bonds or other fixed income securities.
The investment portion of the variable life insurance policy makes it a very unique type of insurance coverage. Many other life insurance policies do not offer the ability for the insured to choose between different investment options. For example, with traditional whole life insurance, a portion of the premium goes to investments, but they are chosen by an investment manager. Variable life insurance provides all of the investment options to the insured as well as the responsibility of choosing the right investments.
Many individuals prefer this type of life insurance because it provides them with control. With regular whole life insurance, policyholders do not know where all of their premium is going. With variable life insurance, the policyholder will be in charge of everything and know exactly where his money is going.