Variable Life Insurance – Pros & Cons

Variable Appreciable Life Insurance popularly known as Variable Life Insurance is designed to provide stable security to your immediate beneficiary after your death. The life insurance policy in this category is termed "variable" as you can allocate a portion of your premium dollars to a separate account in various investment funds within the insurance company's portfolio. These may be an equity fund, a money market fund, a bond fund, or some combination thereof. However, it is to be noted that the value of the death benefit and the cash value may fluctuate with the performance of this investment portion of the policy.

It is also true that though most variable life insurance policies guarantee that the death benefit will not fall below a specified minimum, it does not guarantee a minimum cash value. Variable is a form of whole life insurance and due to investment risks it is considered a securities contract. The Variable Life Insurance is regulated as securities and comes under the purview of the Federal Securities Laws. It is therefore mandatory to sell the policy with a detailed prospectus.

Pros:

With the Variable Life Insurance policy you can participate in various types of investment options without having to pay tax on your earnings. You can further enjoy this benefit as long as you do not surrender the policy. Moreover, you can also apply interest earned on these investments toward the premiums, thus lowering the amount you pay.

Cons:

Your investments are often at stake. With poor investment funds performance, you end with less money to pay the premiums, which in turn mean that you may have to pay more than you can afford to keep the policy in force. Poor fund performance also means that the cash and/or death benefit may decline, though never below a defined level. And above all even in dire needs, you cannot withdraw from the cash value during your lifetime.

More information http://www.ratedetective.com.au/insurance/life-insurance