Variable Death Benefit

DEFINITION of 'Variable Death Benefit'

The amount paid to a decedent's beneficiary that is dependent on the performance of an investment account within a variable universal life insurance policy. The policyholder can choose among several investment options offered by the insurer, ranging from guaranteed interest to mutual funds to stocks and bonds. The variable amount (the policy's cash value) is added to any guaranteed minimum death benefit (the policy's face value) to form the total death benefit.

BREAKING DOWN 'Variable Death Benefit'

The variable death benefit is one of three death benefit options available with variable universal life insurance policies. The other two are a level benefit and a return of premium benefit. Each of these three benefit types is not taxable to the beneficiary, and if the policyholder borrows against the policy, the death benefit is reduced. The variable death benefit is also called an "increasing benefit," but this is somewhat of a misnomer because a variable death benefit can either increase or decrease depending on investment performance.