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.

RELATED TERMS
  1. Level Death Benefit

    A life insurance payout that is the same whether the insured ...
  2. Variable Life Insurance Policy

    A form of permanent life insurance, Variable life insurance provides ...
  3. Variable Survivorship Life Insurance

    A type of variable life insurance policy that covers two individuals ...
  4. Death Benefit

    The amount on a life insurance policy or pension that is payable ...
  5. Add To Cash Value Option

    A common benefit option on life insurance policies wherein the ...
  6. Variable Universal Life Insurance ...

    A form of cash-value life insurance that offers both a death ...
Related Articles
  1. Managing Wealth

    Life Insurance With an Increasing Death Benefit

    Why buy a life insurance policy with an increasing rather than level death benefit
  2. Insurance

    How a Death Benefit in a Variable Annuity Works

    A look at how the death benefit in a variable annuity works.
  3. Financial Advisor

    Advising FAs: Explaining Life Insurance to a Client

    Life insurance was initially designed to protect the income of families, particularly young families in the wealth accumulation phase, in the event of the head of household's death.
  4. Insurance

    5 Things You Didn't Know About Life Insurance

    Life insurance policies can be simple or complex; make sure you know as much as you can before setting up yours.
  5. Insurance

    6 Ways To Capture The Cash Value In Life Insurance

    If you die with cash value left in your life insurance policy, the money goes to the insurance company – not to your beneficiaries. Here's what to do instead.
  6. Managing Wealth

    Use Life Insurance to Help Those With a Disability

    Why and how to use permanent life insurance to help provide for a family member with a disability or special needs
  7. Insurance

    Life Insurance: How Long Does It Take To Get Paid?

    How to file for a life insurance payout – and how long it takes to receive it. Plus, new ways to plan for payments that provide an income stream.
Hot Definitions
  1. Leverage Ratio

    Any ratio used to calculate the financial leverage of a company to get an idea of the company's methods of financing or to ...
  2. Two And Twenty

    A type of compensation structure that hedge fund managers typically employ in which part of compensation is performance based. ...
  3. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying ...
  4. Expense Ratio

    A measure of what it costs an investment company to operate a mutual fund. An expense ratio is determined through an annual ...
  5. Mezzanine Financing

    A hybrid of debt and equity financing that is typically used to finance the expansion of existing companies. Mezzanine financing ...
  6. Long Run

    A period of time in which all factors of production and costs are variable. In the long run, firms are able to adjust all ...
Trading Center