Variable Whole Life Insurance
Variable whole life insurance does away with traditional whole life insurance's guarantee on cash value growth in order to make a better investment tool. Whereas the cash value's interest rate is fixed in a traditional policy, variable whole life insurance policies leave the policyholder to decide how his equity should be invested and to reap the rewards of his decisions.
A variable whole life insurance policy still has fixed premiums and a fixed death benefit, however.
Management fee & the policyholder's powers
Variable life insurance is more expensive for the insurer to administer than non-variable life insurance: For the purposes of investment, the insurer can treat all of the cash value from all of the non-variable types of life insurance as a single sum to be invested across the company's general portfolio. But with variable life insurance, each policy's cash value has to be treated separately and, according to the tastes of the policyholder, divided among multiple investments and/or relocated to new investments on demand. Therefore, an extra fee—a small percentage of the cash value being managed—is imposed on variable life insurance policies.
Investment risk
There is an obvious drawback to variable whole life insurance, and that is that it is possible to experience an interest rate lower than the guaranteed rate which a comparable traditional whole life insurance policy could offer. In fact, it is possible to suffer a negative rate of return—to have one's cash value actually decrease—if one's investments perform poorly.
Scope of investment opportunities
Government filing requirements entail that each variable life insurance product stipulate where policy owners may invest its cash value. Therefore, your investment options are restricted in some degree.
To speak with a licensed life insurance advisor about variable life insurance or to purchase variable whole life insurance, call 1-800-823-4852 today.
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