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What is Variable Life Insurance?
July 8, 2019 at 12:00 AM

At Real Whole Life, we excel in all aspects of life insurance. Our clients know that they can turn to us for simple explanations of complex issues.

In this post, we'll go over what variable life insurance is as well as variable insurance benefits. This way, you'll be able to determine if this type of policy is a good option for you or not. 

Defining Variable Life Insurance 

In the simplest terms, a variable life insurance policy is a permanent life insurance policy. However, it differs from a lot of traditional life insurance policies because there is an investment component attached to it. Variable life insurance policies have a cash value account. This cash value account gets invested into several sub-accounts through the policy. 

These sub-accounts on this life insurance policy acts like mutual funds. However, it's only available with this policy. Your traditional variable policy will come with a host of sub-accounts, and they can range up to 50 separate options. 

The main cash value account of this policy can potentially grow in size. It does this as the sub-accounts' investments grow. However, should the sub accounts' investments go down, so does the amount in the main cash value account. 

One of the main draws of this policy is the policy's investment element. This investment element can give you favorable tax treatment in reference to the policy's growth on the cash value account. The IRS isn't able to tax any growth of your cash value account on an annual period as ordinary income.

You can also access these values years later. Also, when you set this account up and use it correctly by taking out loans and using your account as your collateral, you'll have no income taxation. If you decide to go through using direct withdrawals, it can be subject to income taxation. 

Variable Insurance Benefits 

Along with the two benefits we mentioned, there are other good reasons to choose this life insurance policy. They include but are not limited to: 

  • Guaranteed Death Benefit - Market fluctuation can affect your policy's investment component value. But the death benefit amount that goes to your policy's beneficiaries upon your death is guaranteed. No matter how the market fluctuates, your beneficiaries will have funding available from this portion of your variable insurance policy. 
  • Fixed Premium Amounts - One large advantage of this type of insurance policy is the premium. Most of them come with a fixed premium amount. This means that your yearly or monthly premium won't go up in the future. You can plan to pay the same amount time and time again. 
  • Investment Variety - Since you get several more investment options than traditional life insurance policies, you have more growth options. Usually, the insurance company chooses the underlying investments. But variable insurance policies give you a lot more flexibility. 

If you're considering a life insurance policy, you really should take a look at variable life insurance. The variable insurance benefits are well worth the ability of the account to fluctuate. Additionally, you can tailor your sub-accounts to suit you. In turn, you can invest in your future with confidence.