A variable life policy consists of both insurance and investment sub accounts. The idea sounds remarkably great however; the results can be less than favorable. Some Variable life policies do not have a guaranteed floor which protects your principal from loss in a market downturn which could affect your cash value and overall performance.
What are the common reasons for purchasing a Variable Life Insurance Policy?
- Potential growth of Insurance and or Cash Value.
- Tax deferred growth of money
- Potentially favorable ways of withdrawing money by loans and or withdrawals.
Who should buy a Variable Life policy?
If you are more interested in the upside potential of the cash and not in the death benefit this policy could be an option for you. If you are relatively young and want to take advantage of the low cost still associated with mortality tables vs. premium, this could be a good fit for you.
Who should not buy Variable Life?
People with a relatively short need for insurance like 10-15 years should probably look at term. Also if you need a large amount of coverage, term insurance will be cheaper than Variable Life in most circumstances. People who have a high desire for cash build up in there insurance and are willing to take extra risk will find this policy a possible fit. People on a tight budget should not buy this type of insurance as if not over-funded a downturn in the market could cost you your insurance and or cash value.
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