Variable Life Insurance Policy

AAA

DEFINITION of 'Variable Life Insurance Policy'

A form of permanent life insurance, Variable life insurance provides permanent protection to the beneficiary upon the death of the policy holder. This type of insurance is generally the most expensive type of cash-value insurance because it allows you to allocate a portion of your premium dollars 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. In addition, because of investment risks, variable policies are considered securities contracts and are regulated under the federal securities laws; therefore, they must be sold with a prospectus.

INVESTOPEDIA EXPLAINS 'Variable Life Insurance Policy'

The major advantage to variable policies is that they allow you to participate in various types of investment options while not being taxed on your earnings (until you surrender the policy). You can also apply the interest earned on these investments toward the premiums, potentially lowering the amount you pay. However, due to investment risks, when the invested funds perform poorly, less money is available to pay the premiums, meaning that you may have to pay more than you can afford to keep the policy in force. Poor fund performance also means that the cash and/or death benefit may decline, though never below a defined level. Also, you cannot withdraw from the cash value during your lifetime.

VIDEO

RELATED TERMS
  1. Free Look Period

    A period where a new insurance policy owner is able to terminate ...
  2. Adjusted Premium

    An adjusted premium is the premium of a life insurance policy ...
  3. Adjusted Premium Method

    A calculation method used arrive at a life insurance policy's ...
  4. Equity-Indexed Universal Life Insurance

    A permanent life insurance policy that allows policyholders to ...
  5. Permanent Life Insurance

    An umbrella term for life insurance plans that do not expire ...
  6. Universal Life Insurance

    A type of flexible permanent life insurance offering the low-cost ...
Related Articles
  1. Insurance

    Top 10 Life Insurance Myths

    The most difficult aspect of this complex product is determining how much coverage you need and why.
  2. Retirement

    Vary Your Options With Variable Annuities And Insurance

    Find out how to get the customized insurance coverage you need and want.
  3. Retirement

    Variable Vs. Variable Universal Life Insurance

    Do you know why you might need one policy versus the other? Read on to find out.
  4. Insurance

    Life Insurance: Putting A Price On Peace Of Mind

    Would your death leave loved ones financially stranded? Find out how to ease your mind and keep them protected.
  5. Home & Auto

    What is indexed universal life insurance?

    Indexed univeral life insurance is a lot like universal life insurance, however it does have a couple of wrinkles not found in traditional universal insurance policies. Universal life insurance ...
  6. Options & Futures

    Taking The Bite Out Of Annuity Losses

    If this investment product has caused you sleepless nights, it's time to consider alternatives.
  7. Retirement

    The Cost Of Variable Annuity Guarantees

    These products tempt investors with some impressive benefits - but they come at a price.
  8. Insurance

    What To Expect When Applying For Life Insurance

    Before jumping into a policy, check out these tips on how to score the best plan for you.
  9. Home & Auto

    What is the difference between term and universal life insurance?

    Term life insurance is the most basic of insurance policies. It is nothing more than an insurance policy that provides protection for accidental death and possibly debilitating injuries for a ...
  10. Options & Futures

    What is variable life insurance?

    Variable life insurance is a permanent life insurance policy with an investment component. The policy has a cash value account, which is invested in a number of sub-accounts available in the ...

You May Also Like

Hot Definitions
  1. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  2. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  3. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  4. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  5. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  6. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
Trading Center