Managing Your Legacy: Understanding the Benefits and Risks of Variable Life Insurance

    

 Variable life insurance (VLI) is a type of permanent insurance. A VLI policy is designed to provide financial benefits during your lifetime and to provide financial benefits to your beneficiaries upon your death. Variable life insurance policies can be invested for higher returns than permanent life insurance Insurance.

What is variable life insurance?

Variable life insurance (VLI) is a type of permanent insurance designed to serve the life of the insured. Like other permanent life insurance policies, VLI policies have an investment component called cash value and a guaranteed death benefit. Your coverage continues as long as you pay your premiums And you follow the policy rules.

For those willing to take the risk, variable life insurance is an option. VLI policies can be invested but returns are not guaranteed. If the market is doing well, so can the cash value of your policy. If the market turns bearish, your VLI policy could lose value. However many Policies include a floor against negative returns. Depending on the company or policy language, your earnings may be limited by a certain percentage. Any excess returns will be forfeited by the insurance company.

What is variable life insurance?

Variable life insurance premiums go into the account for investment purposes. As a policy owner, you can decide how to allocate the cash value into various investment vehicles or sub-accounts such as mutual funds. Depending on the policy.

Risk is part of any investment. If the market does not perform well, the cash value of your policy may be affected. If the market is doing well, the cash value of your policy will also be affected. This may result in additional funds that can be loaned out or redirected to the policy's Last bonus. This could negatively impact your death benefit and make it taxable.

Is variable life insurance taxable

Variable life insurance policies have a tax-deferred cash value. You pay no taxes other than to withdraw the funds (unlike borrowing cash value). If you take out a loan under the policy, you are not taxed. death benefit is not Treated as gross income by the IRS, so your beneficiaries don't have to pay taxes on the money they receive.

Variable Life Insurance vs Term Life Insurance

Both VLI and term have fixed premiums. Premiums for term life insurance tend to be lower than permanent products like VLI because there is no investment component that increases cash value over time. Periodic life and death benefits are not guaranteed while the policy is in force. Terms Policies and insurance companies can vary between 1 and 30 years, depending on their policies. VLI and other permanent insurance policies provide continuous coverage for the life of the insured.

Variable Life Insurance vs Whole Life Insurance

Whole life insurance can be obtained through whole life insurance and variable life insurance. No policy can be revoked due to health changes. Premiums are fixed and non-refundable. Both types of life insurance have death benefits, and both can accumulate a tax-deferred cash value over time.

The main difference is growth potential and risk. Earn a fixed, low interest rate on the cash value of a whole life insurance policy. This is similar to a savings account or money market account. A death benefit is also guaranteed. VLI policies offer greater flexibility and allow you to invest The cash value of a security such as a mutual fund. It may be more volatile and subject to market performance. You also have to pay the fees for managing the investment portion.