Variable Life Insurance
Variable Life Insurance is an insurance plan that pools your premiums into stocks, bonds and various types of funds. The maintenance required by the contract owner makes Variable Life Insurance usually the most expensive type of plan. Contract owners can raise these maintenance costs at any time, provided they do not surpass a predetermined cap. The main advantage to owning this type of Life Insurance is that you are not taxed on your investment earnings. Although this tax break may seem like a substantial savings, many believe that this tax reduction is offset by the high maintenance fees. Therefore, only those in the highest tax brackets earn enough to reduce the maintenance fee differential.
Issues with Variable Life Insurance can occur when poor investment choices are made by the insurer, causing the policy holder’s premiums to rise. However, wise investment choices have the reverse effect and can lead to very minimal premiums. Additionally, it is important to note that these investment choices usually do not provide great variety and are often limited to less than twenty. Despite having limited investment choices, Variable Life Insurance is still flexible by nature and thus is labeled a security contract, making it federally regulated.
Surrendering the cash value of your Variable Life Insurance plan is also extremely difficult and in some cases not possible. However, if you are certain that surrendering will not be necessary and you plan early enough there are potential tax advantages in many areas such as education and retirement planning. To conclude, Variable Life Insurance plans require extremely precise planning and it is worthwhile to consult Life Insurance Pro when choosing a plan that is right for you.