The Advantages and Disadvantages of Variable Life Insurance

2007-03-08 10:33:40

( Insurance )



If you are looking for a cheap life insurance, term life insurance is the insurance for you. This is the most commonly used life insurance with mortgages, which provides a specified level of cover for a certain period. This life insurance could serve as one of the cheapest life insurance that you can purchase. Term life insurance quotes can be spotted online. Numerous websites offers quotes from a database of companies that offer term life insurances.

Variable life insurance is life insurance in which a part or all of the cash value of the policy is placed in a tax-deferred investment portfolio with risk assumed by the insured for investment losses.

In combining death benefits and savings, a variable life insurance policy goes beyond whole and universal life policies. The policyholder is the one who decides how to invest the money in the savings component. The investment accounts are set up just like mutual funds, and most firms that offer variable life policies will let you choose from a full life of different funds, ranging from bond funds and money market accounts to aggressively managed stock funds or international investments. But unlike whole or universal policies, no minimum return is guaranteed with a variable life insurance policy. Also, the amount of insurance coverage provided will vary with the profits, and losses as well, produced in the investment account. Consequently, in variable life insurance policies, the amount of death benefits payable is related to the policies’ investment returns, for the most part of the policy.

Variable life insurance is not all great although it may sound as if it is. It is important to keep in mind that variable life insurance puts more importance on investments compared with any other life insurance product. Many people actually view variable life insurance as more of an investment vehicle than a life insurance policy; it is an investment product tied with just enough life insurance coverage to make it legal. Therefore, if you would the benefits of a higher investment returns, you must also be willing to assume the risks of reduced insurance coverage. Evidently, you should then use extreme precaution when buying variable life insurance.


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