Whole Life (Variable) for Parents Explained

Variable life insurance is another form of whole life insurance. However, for those who are more investment savvy variable life insurance offers the option of choosing and paying into an investment vehicle with a variety of funds available through the insurance company’s portfolio.

These funds can include stocks, bonds, equity funds, money market funds and bond funds. Because your money is going into so many different places, the cash value of a variable life insurance policy can fluctuate up and down depending on the performance of your portfolio.

Most insurance companies offer a guarantee that your death benefit amount won’t fall below a specified minimum, though cash value is rarely ever guaranteed.

Variable life insurance is popular because it allows you to participate in a variety of investment options while not being subjected to taxation on that income. You can even take some of the interest earned on your investments and put it toward premiums, lowering the amount you have to pay.

So, is variable life insurance a good option for you? That depends upon several factors. First, this is one of the most expensive insurance options available because it requires more funding to pay for the investment vehicle.

Also, if those investments don’t do well, you are liable for the cost of your policy. This means that when your investments perform badly you will need to pay more to keep the insurance policy in force.

If your investments do poorly there’s also a chance you’ll see a decline in the cash and/or death benefit, though never below a specified level.

For parents who don’t want to spend a lot of money on their insurance, a variable insurance policy probably isn’t for them.

Also, since variable policies allow you to choose which investments to make, it’s important to do research and be aware of the market before you make any decisions regarding this type of insurance.

Finally, as is the case with other whole life insurance policies, a variable policy only pays well if you plan to keep the account for 15 to 20 years. Cashing it out before this time period will mean a loss of money, and likely won’t make it worth what you’ve already paid into the policy.

If, however, you have the funds for a variable life policy, you want to invest, and you plan on keeping the policy for a long time, variable life insurance might be a good selection. If your investments do well your children will be very well provided for in the event of your demise, and the ability to save your money free from taxation means that with successful investing you’ll enjoy watching your cash value grow every year.

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