When looking for life insurance, variable life insurance is one of the alternatives you may come across. Here’s everything you need to know about it, including how it works, how much it costs, and the hazards it poses.
What is variable life insurance?
Variable life insurance is a policy that pays out to your beneficiaries and allows you to earn money if you die. These types of insurance are good for the remainder of your life or if you keep paying the premiums. That payment is set in stone, so whatever you pay now will be the same until you die.
Part of the premium is used to pay for the death benefit, while the rest is put into an account where it can be invested. This is the cash value, which you can use to borrow money. It is referred to as “variable†because the policy’s cash value might fluctuate based on where it is invested.
Insurance companies can provide various investment options, such as stocks and bonds. The policyholder gets to pick how they invest money in a variable plan so that the policy can perform a lot better than a non-variable policy. Still, it can also perform a lot worse.
The cost of variable life insurance is determined by several criteria, including the amount of coverage you choose, the riders you add, your age, gender, and overall health. Fees for administration, loan interest, and sales are charged on variable life insurance.
Variable life insurance isn’t without its drawbacks. As previously stated, because you have the freedom to choose your assets, you may be able to earn more than you would with whole life insurance, which has a cash value cap. However, you may lose money if the market does not perform well.
The policyholder bears much of the risk in how the policy operates, rather than the insurance company. So you have to be confident in making those investing decisions.
Another factor to consider is that, due to the high costs and expenses involved with these policies, they’re not worth it if you’re looking for a way to save money in the short term.
If you’re seeking that, another form of insurance, such as a whole life policy that guarantees specified returns, would be a better fit.
Variable policies may not be the best option for many people because other solutions are less risky. It may be a beneficial alternative for people who want a hands-on approach to their finances, are willing to take on more risk in exchange for a possibly more significant gain, or pay extra for riders to protect their investments.
Contact Information:Email: mackhales@bellsouth.netPhone: 7705402211Bio: Mack Hales has spent the past 4 decades helping clients prepare for retirement and manage their finances successfully. He also works with strategies that help clients put away much more money for their retirement than they could in an IRA or even a 401k. We involve the client’s CPA and/or their tax attorney to be sure the programs meet the proper tax codes.
Mack works with Federal Employees to help them establish the right path before and after retirement. The goal is to help the client retire worry-free with as much tax-free income as possible and no worries about money at risk of market loss during retirement.
Mack has resided in Gainesville, GA since 1983, so this is considered home. Mack is married to his wife of 51 years, has two boys and five grandchildren.Disclosure: Investment advisory services are offered through BWM Advisory, LLC (BWM). BWM is registered as an Investment Advisor located in Scottsdale, Arizona, and only conducts business in states where it is properly licensed, notice has been filed, or is excluded from notice filing requirements. This information is not a complete analysis of the topic(s) discussed, is general in nature, and is not personalized investment advice. Nothing in this article is intended to be investment advice. There are risks involved with investing which may include (but are not limited to) market fluctuations and possible loss of principal value. Carefully consider the risks and possible consequences involved prior to making any investment decision. You should consult a professional tax or investment advisor regarding tax and investment implications before taking any investment actions or implementing any investment strategies.
