Ashlee is an insurance editor, journalist and business professional with an MBA and more than 17 years of hands-on experience in both business and personal finance. She is passionate about empowering others to protect life's most important assets. Wh.
Ashlee Valentine Deputy Editor, InsuranceAshlee is an insurance editor, journalist and business professional with an MBA and more than 17 years of hands-on experience in both business and personal finance. She is passionate about empowering others to protect life's most important assets. Wh.
Written By Ashlee Valentine Deputy Editor, InsuranceAshlee is an insurance editor, journalist and business professional with an MBA and more than 17 years of hands-on experience in both business and personal finance. She is passionate about empowering others to protect life's most important assets. Wh.
Ashlee Valentine Deputy Editor, InsuranceAshlee is an insurance editor, journalist and business professional with an MBA and more than 17 years of hands-on experience in both business and personal finance. She is passionate about empowering others to protect life's most important assets. Wh.
Deputy Editor, Insurance Amy Danise Managing Editor, InsuranceAmy Danise is the managing editor for the insurance section at Forbes Advisor, which encompasses auto, home, renters, life, pet, travel, health and small business insurance. She is a highly experienced editor, writer and team leader with an extensive.
Amy Danise Managing Editor, InsuranceAmy Danise is the managing editor for the insurance section at Forbes Advisor, which encompasses auto, home, renters, life, pet, travel, health and small business insurance. She is a highly experienced editor, writer and team leader with an extensive.
Amy Danise Managing Editor, InsuranceAmy Danise is the managing editor for the insurance section at Forbes Advisor, which encompasses auto, home, renters, life, pet, travel, health and small business insurance. She is a highly experienced editor, writer and team leader with an extensive.
Amy Danise Managing Editor, InsuranceAmy Danise is the managing editor for the insurance section at Forbes Advisor, which encompasses auto, home, renters, life, pet, travel, health and small business insurance. She is a highly experienced editor, writer and team leader with an extensive.
| Managing Editor, Insurance
Updated: Jun 1, 2023, 10:13am
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If you want a life insurance policy that builds cash value and lets you take a role in investing that cash value, you might be considering variable life insurance. Depending on your goals, variable life insurance (and the very similar variable universal life insurance) might be a good fit for your long-term insurance, investment and tax-planning needs.
Before you buy this type policy, make sure you understand how it works.
Variable life insurance is a type of permanent life insurance with a death benefit and cash value. You should be ready to take an active role in choosing investment options for your cash value—unlike other policies, such as whole life insurance, where investment choices are made by the life insurance company.
Variable universal life (VUL) insurance has the features of a variable life policy combined with elements of a universal life insurance policy—specifically, that you can adjust your premium payments and the death benefit amount within certain limits.
Life insurance buyers looking for variable life will likely find mostly VUL options these days.
Similar to other types of life insurance, a variable life insurance policy pays a tax-free death benefit to your beneficiaries after you die.
Variable life and variable universal life insurance policies include a cash value component that changes based on:
Variable life insurance gives you the freedom to decide how to invest the cash value money. But you do need to make choices, so if you want a life insurance policy that you don’t have to pay attention to, a variable life or a VUL policy is likely not right for you.
Life insurance and wealth consultant Guy Baker, founder and managing director of the Wealth Teams Alliance wealth advisory firm, notes that variable life insurance buyers often use the policies to provide extra retirement income by taking out loans taken against the cash value. You aren’t required to pay taxes on the money that’s borrowed (unless it’s never paid back).
When you pay premiums on a variable life insurance policy, your premiums go toward:
A variable life insurance policy’s cash value component can contain dozens of sub-accounts, typically including mutual funds, bonds and stocks. You can also choose to put some of your cash value into a non-investment account, or a fixed account, that pays interest on the money deposited, such as 3%.
You must make sure your premium payments create sufficient cash value or the policy will lapse. For example, if you take a loan against the cash value, and then the insurer subtracts its monthly fees and charges, your cash value could dip below the minimum required amount, causing the policy to lapse. In these cases, you must make an extra premium payment to keep the policy in force.
