Agent Owner, Gilmore Insurance Services, Marysville, Washington State
How does a variable life policy work? The portions of the premium that don't pay expenses or cost of insurance go into the accumulation account within the policy. From this accumulation account the insured chooses different mutual fund investments within the insurance policy. These choices have the potential to preform better than average, average or below average.
Great care must be had when deciding on a variable life policy. These are not simply buy and put in a drawer plans. Variable Life policies require review and readjustment/allocation over time. If you do not plan on paying attention to this type of policy, do not choose it.
President, The Firm of Steven H. Kobrin, LUTCF, 6-05 Saddle River Rd #103, Fair Lawn, NJ 07410
Variable life insurance is an investment in a mutual fund inside life insurance.
I sold a lot of it early in my career as what was called a “private pension plan.” Unfortunately, so many consumers became confused over exactly how to manage this product, the government cracked down and stopped us from using these terms.
The thing is, variable life is not really a pension. It’s life insurance. It’s job is to provide a survivor benefit at the lowest cost possible. Along the way, it’s nice to grow some cash on a tax-favored basis. If you can grow that cash inside a mutual fund, as opposed to inside the general account of a life insurance company, you might be able to grow a lot of it.
But you always have to worry about paying the expenses related to the product. There are mortality costs, admin fees, taxes, and so on. If you don’t manage the investment accounts scrupulously, you might end up jeopardizing the survivor benefit. You may end up with a lower benefit than needed. The policy may not sustain a benefit for as long as you want.
These are things you need to know as you research the world of life insurance products.
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Great care must be had when deciding on a variable life policy. These are not simply buy and put in a drawer plans. Variable Life policies require review and readjustment/allocation over time. If you do not plan on paying attention to this type of policy, do not choose it.
I sold a lot of it early in my career as what was called a “private pension plan.” Unfortunately, so many consumers became confused over exactly how to manage this product, the government cracked down and stopped us from using these terms.
The thing is, variable life is not really a pension. It’s life insurance. It’s job is to provide a survivor benefit at the lowest cost possible. Along the way, it’s nice to grow some cash on a tax-favored basis. If you can grow that cash inside a mutual fund, as opposed to inside the general account of a life insurance company, you might be able to grow a lot of it.
But you always have to worry about paying the expenses related to the product. There are mortality costs, admin fees, taxes, and so on. If you don’t manage the investment accounts scrupulously, you might end up jeopardizing the survivor benefit. You may end up with a lower benefit than needed. The policy may not sustain a benefit for as long as you want.
These are things you need to know as you research the world of life insurance products.