Variable life insurance is considered to be a more complex form of customizable permanent coverage, offering an alternative investment option. This policy is ideal for those with a high net worth interested in tapping into tax-deferred growth potential in exchange for risking the plan’s cash value altogether. However, if you’re like many Americans seeking reliable whole life coverage, you should carefully consider whether this kind of plan is right for you.
We’ll get familiar with the key features of variable life insurance, why you and your loved ones might want to invest in this policy, and why this type of plan is ideal for younger applicants instead of seniors seeking end-of-life coverage.
Call (866) 786-0725, Monday through Friday, 9 a.m. to 5 p.m. ET for more information or check our free online quoting tool for personalized estimates from top-rated insurance providers today.
Key takeaways
- Variable life insurance is a permanent policy that offers a death benefit and cash value growth tied to investment securities.
- Death benefits are tied to the policy’s cash value, which depends on market performance, making variable life much riskier than other types of life insurance.
- People with high net worth should consider a variable life policy due to its unique tax offerings.
- Variable life insurance is usually more expensive than term life and whole life policies.
What is Variable Life Insurance?
Variable life insurance, also known as variable universal life insurance, is a permanent plan made of various investment funds such as stocks, bonds, and other tradable financial assets. This type of plan can be used like a whole life policy since you’ll have a guaranteed death benefit payout and potential to build cash value over time.
It is also closely related to universal life insurance, as it allows you to adjust the amount and frequency of premium payments for
flexibility. However, the cash value and your death benefit amount depend on investment market performance, making variable life an incredibly high-risk insurance option.
For example, take a variable life policy with an initial premium payment of $40,000, split 50-50 between a stock and a bond fund. After a year, the stock fund’s value has increased by 7% ($21,400) and the bond fund’s value by 3% ($20,600). As a result, your variable life plan account now returns a new balance of $42,000.
Additionally, variable life insurance policies offer specific tax benefits such as tax-deferred accumulation of earnings and access to the plan’s cash value via tax-free loans. However, unpaid loans will reduce the policy’s death benefit.
With variable life’s riskier investments, this form of insurance may not be the best option for seniors seeking stable coverage. So if you’re interested in a more traditional form of permanent coverage to help you handle final expense costs, call us at (866) 786-0725, Monday through Friday, 9 a.m. to 5 p.m. ET, and learn more about some of the top providers on the market today.
What Makes Variable Life Insurance So Different?
Variable life insurance is a more expensive and riskier type of permanent life insurance. Typical variable life policies are built on a death benefit, like whole life, final expense, and universal life plans, and variable cash value, which depends on your selected investments. Because of the wider range of variable life insurance coverage investment options, it could be a greater benefit to beneficiaries in the long run if your investment decisions are sound. However, these policies are generally higher in risk, fees, and costs.
Variable Life Insurance Vs. Whole Life Insurance
Whole life insurance is often regarded as the simplest form of permanent life insurance, offering lifetime coverage. Compared to other forms of coverage, whole life insurance has three main distinctions: level premium rates for life, guaranteed death benefits (as long as premiums are paid), and guaranteed cash value that grows at a guaranteed rate.
Against variable life insurance, whole life insurance is a much more stable form of coverage thanks to its guaranteed growth component.
Variable Life Insurance Vs. Final Expense Insurance
Final expense insurance, also known as burial insurance or funeral insurance, is a specific type of whole life plan designed to cover end-of-life expenses such as burial plots, funeral services, cremations, and more. This is an ideal policy for seniors as it helps either them or their loved ones prepare for the unexpected by covering expenses that would otherwise be paid out-of-pocket.
Since final expense insurance is a type of whole life policy, it shares some similar characteristics. For instance, coverage is permanent as long as monthly payments are made, and because it’s a whole life plan, you’re putting your money in an insurance plan with cash value growth potential.
For more information on how you can find a quality final expense policy, check out our online quoting tool and find a plan that works for you today.
Variable Life Insurance Vs. Term Life Insurance
A term life policy provides coverage for a limited period, typically between 10 and 30 years. Unlike variable life insurance, this policy does not offer cash value growth and only provides a payout if you pass away during the policy’s active period.
However, term life policies tend to be cheaper due to payments being limited to term limits versus variable life policies which are permanent.
Other Permanent Life Coverage Options: Final Expense Insurance
While the potential higher cash value growth can be tempting for some, the reality is that variable life insurance is simply not ideal for most senior applicants. For those who can handle a lot of financial risk or are seeking alternative investment options, this type of plan can be useful for young adults, given its growth potential.
For seniors, the market is incredibly unstable. So, instead, consider final expense insurance—a steadier, more reliable permanent policy. Here are some of the top providers on the market today that can help you invest for the future:
Sample $10K Final Expense Insurance Rates
| Company |
Male 50y/o |
Male 60y/o |
Male 70y/o |
Female 50y/o |
Female 60y/o |
Female 70y/o |
|---|---|---|---|---|---|---|
|
$34 |
$51 |
$73 |
$27 |
$41 |
$58 |
|
|
$31 |
$43 |
$71 |
$26 |
$35 |
$53 |
|
|
$37 |
$50 |
$75 |
$26 |
$37 |
$55 |
|
|
$31 |
$44 |
$75 |
$24 |
$33 |
$53 |
|
|
$34 |
$45 |
$79 |
$29 |
$35 |
$59 |
These figures are estimates only, based on a $10,000 final expense insurance policy with no applicant pre-existing conditions.
Final Thoughts
Before even considering variable life insurance, you need to weigh the costs and benefits. Variable life insurance can offer some of the same pros as whole life and universal life plans—death benefits and cash value growth. However, death benefits are tied to high-risk investments, making payouts unreliable.
Seniors should be seeking a more stable, traditional form of life insurance, so you’re better off investing your money in a whole life policy that will not only cover you for life but also handle final expenses.
If you or your loved ones are interested in learning more about permanent life coverage options, talk to one of our expert agents and call Final Expense Benefits at (866) 786-0725, Monday through Friday, 9 a.m. to 5 p.m. ET.
FAQ
What is variable life insurance?
Variable life insurance is a type of permanent life insurance, like a whole life plan or universal life policy, that offers a death benefit and a cash value growth component.
What does variable life insurance cover?
Variable life insurance provides lifelong death benefit protection while offering a cash value component invested in various forms of securities. Beneficiary payout is dependent on those investments’ market performance.
Who should consider variable life insurance?
People with a high net worth may want to consider a variable life insurance policy, as they can handle the risk of losing money for underperforming investments. In general, individuals who’ve discussed their long-term goals with a financial advisor and fully grasp the inner workings of variable life insurance can look into applying for this sort of plan as well.
What’s the difference between variable life insurance and whole life insurance?
Whole life insurance is a much more stable form of coverage thanks to its guaranteed growth component. The death benefit and cash value of a variable life policy depend on the market performance of its asset investments.