Comparing Variable Life Insurance to Universal and Variable Universal Life Insurance
Posted by: Insurance Place by: August 25, 2015
There are many forms of life insurance available, each with its own set of advantages and disadvantages. While many people may be aware of Universal Life Insurance, Variable Life Insurance and Variable Universal Life Insurance are a couple of other options that incorporate an investment opportunity.
The following is a breakdown of these three life insurance options:
Variable Life Insurance Definition
Many people in the market for life insurance find themselves asking, “what is variable life insurance?” Variable life insurance is a form of insurance that adds investment opportunities to a life insurance policy. A fixed premium, which you can choose between a minimum and maximum amount, is placed in a separate account for investing in stocks, bonds and mutual funds. The interest that your account earns through these investments increases the cash value of your account.
While there is no guaranteed cash value, the variable life insurance policy does offer a guaranteed death benefit through extra premiums that it will not be less than the face value of the policy. Depending on the success of the investments, the death benefit and cash value may be higher though. Another benefit of variable life insurance is being able to borrow against the cash value without paying taxes on the gain.
Universal Life Insurance Definition
Universal Life Insurance, also known as flexible permanent life insurance, allows for flexible premiums and combines death benefits with cash value that is reinvested and tax deferred. After paying the first premium, the deposit amount and frequency can vary. However, the less premiums paid, the less cash value the insurance account will have. Policyholders don’t have a say in how your premiums are invested but you are able to increase or decrease the death benefit and can typically take a loan out against the policy.
Variable Universal Life Insurance Definition
This insurance option combines Variable Life Insurance and Universal Life Insurance. It provides the payment flexibility of the universal policy but also allows the policyholder to choose the investments as in the variable policy. The minimum death benefit is guaranteed as long as the minimum premiums are met but there is no guaranteed cash value. While investing carries risks if a bad investment is made, it also can be rewarded with good investment decisions that yield tax-deferred earnings.