Variable Life Insurance: Multiple Funds in One

Variable Life Insurance is a form of permanent life insurance where the policy holder can make additional accounts or funds aside from the death benefits of his/her life insurance. This type of life insurance sounds similar to universal life insurance, the difference is that, in variable life insurance, cash account and other funds can be separated. Hence, this kind of life insurance is more costly than other types of life insurance because the policy holder is creating different accounts. And since this is a form of permanent life insurance, the death benefit will last until the policy holder or the insured dies. This is called "variable' because there are a lot of funds available in this kind of insurance because a lot of investments could also be made.

Rationally, a person would acquire a life insurance because the money or assets he left when he dies is not enough to cover the needs of his dependents. In a Variable life insurance, if the death benefits are not enough for the needs of the beneficiaries, they have an additional cash value to sustain their needs. Since there are different funds in the insurance or policy the risk of the policy holder is minimal.

The policy holder needs to plan very well the investments he will give in this kind of insurance. Some insurance companies, once the premium is paid, will offer guaranteed death benefits right away, some will specify a certain age where death benefits can be claimed.

Many studies claim that Variable life insurance guarantees flexibility because they can choose the premiums they can pay. The policy will be active as long as there is enough cash value sin the insurance.

Having a variable life insurance has many advantages. First, since this is a permanent insurance it will not lapse. This type of insurance is tax-deferred therefore will give those with high tax brackets a sign of relief in paying taxes. The cash value of variable type of insurance can be used for retirement or can be used for children's or dependents' education.

However, there are also disadvantages of using a variable life insurance. First, it was mentioned in the earlier part of this study that the cost of this insurance is much higher compared to other types of insurance. Also, since a lot of funds are included in this insurance hence, planning and decision-making is very much needed before acquiring one.