When you purchase variable life insurance, you get the ultimate life insurance flexibility. The main principle behind these variable life insurance policies, is to let you control the life investments instead of the life insurance company, who many times does this on your behalf. It gives you the power to select what level of risk that you subject your insurance fund to. And it paves the way for you to make substantial interest gains in regards to the cash value of your policy.
How do these variable life policies work?
Any type of insurance product is in fact a form of investment. Most of your standard cash-in value life insurance policies, like term life insurance, invest their premiums in low-risk funds that are often obligated to pay a certain return on the level of interest. This gives the life insurance company a confidence for receiving a good rate of return. This then gets transferred through the life insurance policyholder by way of a lump sum that is guaranteed upon death.
So the biggest difference between the variable life insurance policies and the others is that the life insurance company turns the reigns over to you, the policy owner. You make the investment decisions in regard to the money on your policy. These policies come with disclaimers stating that the life insurance company is not responsible for the performance of the investments. So if you make bad investments, you suffer the consequences. And it’s the same if you do good, you will then reap the benefits.
Do You Think Variable Life Insurance is For You?
It’s important to take a real long look at things and not jump into an insurance policy too quickly. Due to the high risk involved with variable life insurance, you may not want to take that kind of a risk. Usually this type of policy is only taken out by those who are seasoned investors and who know their way around the markets. If you have no investment experience, you might want to take a different style policy and then learn about investing before you leap on one of these.
But if you feel confident about investing, then this type of policy could be just what the doctor ordered. Here is what you stand to gain from one of them :
Tax Advantages:
The cash surrender value with a variable life policy, is exempt from taxation, until it is at the point of redemption. In addition, the gains made from the variable life policy are not subject to the capital gains tax, or the CGT.
Variable Life Policy Potential:
With a variable life insurance policy, you gain the potential for making a substantial interest gain that is much higher than that of a standard term policy.