Variable Life Insurance Pros & Cons

Life insurance comes in various types, including permanent life insurance such as a whole life or universal life insurance policy. This type of insurance is available as a whole life or universal life insurance policy that can also be considered variable life insurance. Most variable life insurance policies are sold as a variable universal life insurance. Variable life insurance also has a cash-value component that can be used to invest in a variety of instruments.


Universal life insurance is a product that, like other types of life insurance, pays a death benefit to a dependent or beneficiary and builds a cash value. The cash value component grows because a portion of the premium payment goes into a separate account that used various types of instruments to invest an individual's money. Investments typically include using money market accounts, government bonds as well as domestic and international equity accounts or funds.

Policy Benefits

Individuals who have a variable life insurance policy have many benefits that are provided by this type of policy. One benefit is being able to choose what type of investment option to use for the policy's cash value. Another benefit is that earnings and interest that accumulate in the cash value account are not taxed as income. However, all earnings and interest will be taxed when an individual chooses to surrender the policy.

Premium Payments

Individuals who have earnings from the cash value can use them to pay for the policy premium. This means that the amount of premium that an individual pays may be lower. However, the premium payments for the policy are typically fixed and will not increase while the policy is in force and payments are made on time.


Cash values that use investment vehicles are not immune to risk. This means that the value of the cash value account can increase and decrease depending on the performance of the market. Individuals who use earnings from the cash value account may need to pay more out-of-pocket from premium payments when investments are performing poorly. Individuals are also not permitted to withdraw funds from the cash value while the policy is in force.

Policy Value

Investment performance can affect the value of the policy in positive and negative ways. The cash value amount can be reduced and a lower death benefit amount may result. Individuals are also not able to change the face amount of the policy. This means that if additional coverage is required an additional policy will need to be purchased. Additional costs may apply as well as providing the insurer with evidence of insurability.