Variable universal life insurance policies offered by the flexibility of universal life insurance with a twist: you have the ability to participate in the market through underlying portfolios.
As your family’s financial situation changes over time, variable life insurance allows you to select from a variety of portfolios (ranging in investment style and risk from conservative to aggressive) rather than earning a fixed rate of return.
All guarantees are based on the claims-paying capacity of the insurer . Guarantees do not apply to the performance of the underlying portfolios, which will fluctuate and may lose value.
If you buy this type of policy, you find the features of variable and universal life policies. Your investment risks and rewards characteristic of variable life insurance, including the ability to adjust your premiums and death benefit that is characteristic of universal life insurance.
Who should consider variable life insurance policy?
- Those seeking death benefit protection with the option to invest the policy’s cash value.
- Policyholders interested in growth potential and the flexibility to adjust premiums and coverage.
Key benefits from variable universal life insurance:
- Policy allows growth potential through use of underlying portfolios
- Flexibility to adjust premiums and amount of coverage, depending on policyholder’s financial situation and needs.
How it differs from other life insurance policies:
- Provides flexibility and the opportunity to build cash value.
- Allows policyholder to choose from a variety of underlying portfolios.
This policy offers more flexibility than whole life insurance. You may be able to enhance the death benefit, if you pass a medical examination. The savings accounts (called a cash value account) generally earns a money market rate of interest. After money has deposited in your account, you will also have the option of altering your mode of premium payments – providing there is enough money in your account to pay the costs. This can be a useful feature if your financial condition has suddenly changed.
However, you need to remember that if you close or decrease your premiums and the savings are used up, the policy might lapse and your life insurance coverage will end.
You should check with your insurance consultant or agent before deciding not to prepare premium payments for extended periods because you might not have enough cash value to pay the monthly charges to prevent a policy lapse.