When you think about life insurance, you likely think about whole life and term life insurance. However, there is another option for life insurance called variable life insurance. Variable life insurance may be an attractive option for you if you want a way to invest and have life insurance, but have a tight budget.
What Is Variable Life Insurance?
A variable life insurance policy is like a whole life insurance policy. These two policies are permanent insurance, meaning the policy will not expire after a certain amount of time. A variable life insurance policy also has a cash value account associated with the policy. As you pay your premium, the balance in your cash value account grows just like a whole life policy.
The biggest difference between a variable and a whole life insurance policy is the fact that a variable policy is an investment. A variable policy has additional sub-accounts associated with it. The policyholder can allocate money for investment in money market accounts, bonds, stocks, etc. in their sub-accounts. As a security, an investment into an underperforming sub-account can reduce your cash balance and your death benefit.
However, as an investment, it’s possible for the money in your cash value account to grow quickly. Of course, the rate at which your cash value grows will depend on the performance of your investment.
Why Do Some People Choose Variable Life Insurance?
Variable life insurance may be a good option for a person who is interested in reaping the tax-deferred benefits of a life insurance policy while they are investing. With a variable life insurance policy, you can accumulate the earnings of your investment tax-deferred. A tax-deferred investment allows your earnings to grow quicker than if you had to pay taxes on the money each year.
In addition to capitalizing on the tax-deferred benefit, many people like the idea of having access to their money if they need it. Much like whole life insurance policies, you can borrow from the money in your cash value account of a variable life policy if you need it. If you have the money available in your cash value account, you don’t have to worry about qualifying to get it. You can simply request it. People who find themselves in a financial pinch from time to time find this feature appealing.
A variable life insurance policy is a great option for individuals who invest and want the benefit of a life insurance policy. Under the right conditions, they can see a portion of their premium payments grow substantially.
If you want to learn more about the benefits of a variable life insurance policy, give us a call today.