If you are young, ready to take on the world and looking for long term protection, you might want to consider variable life insurance. It offers investment and security. It is a form of whole life insurance but gives you more control over the cash value and death benefits amount. Variable life insurance provides permanent protection to your beneficiary upon your death. It is generally the most expensive type of cash-value insurance. You can allocate a portion of your premium to a separate account comprised of various instruments and investment funds within the insurance company’s portfolio such stocks, bonds, equity funds, money market funds and bond funds. Variable life insurance is considered securities contracts and is regulated under the federal securities laws by the Securities and Exchange Commission and The Commissioner of Insurance. It must be sold with a prospectus. The premium may go up or down, depending on the status of the market. You have more potential to receive higher benefits when the market is up.
Variable life insurance lets you participate in various types of investment options while not being taxed on your earnings until you surrender the policy. All the monetary growth within the policy is tax deferrable. This also makes it an easy way to avoid estate taxes. You can lower your premiums by applying the interest earned on these investments toward the premiums. As with any securities contract there is an element of risk in variable life insurance. The invested funds may perform poorly. In extreme cases, the policy can lapse, and it will no longer be considered a valid policy. To prevent this from happening, most companies offer a guaranteed minimum death benefit. With these policies, you must pay a minimum premium each month.
You cannot withdraw from the cash value during your lifetime. One way to access the cash value of life insurance is through a policy loan. Like all cash value life insurance, variable life allows you to borrow against your cash value. Policy loans are usually not considered taxable income, but you normally have to pay a nominal interest rate. Policy loans can affect the growth of the cash value, and could reduce the death benefit if they are not repaid. Variable life insurance also gives you the opportunity to make changes in your investment choices without incurring taxes or transaction fees. Most companies limit the number of transactions to about 12 per year.
