Buying insurance needs to be clearer, and if you have typed variable term life insurance into your search engine, you may need clarification than when you started. Term life insurance is one thing, and variable life insurance is another. There are more options than ever when buying any life insurance. This isn’t your daddy’s life insurance policy, for good or bad!
Term life insurance is purchased for a certain amount of time, typically 10, 20, and up to 30 years. At the end of the term, the policy terminates, and you must reapply for another policy. This will include another physical exam unless you choose a term life insurance policy with the guaranteed renewal as part of your original term policy. If you did, you would not have to retake a physical exam. For more information on term life policies, click HERE.
The good thing about this type of policy is that it’s a lot less expensive since it will only cover you for a limited time. The bad part is that if you develop any serious illnesses before the end of the policy, you will pay a lot more to reinstate the policy, or you may even be denied when you try to renew.
Variable life insurance is a type of permanent insurance where the insurance company invests a certain amount of money, that you specify, into money market accounts, stocks, bonds, and equity funds. So not only do you get life insurance protection, but you also get an investment opportunity. Although, keep in mind that these investments will flow with the market’s ups and downs and therefore are considered somewhat risky. In addition, the investments within the policy can be expensive to own or may need better choices.
As a result, the policy’s cash value cannot be guaranteed, and the policy may eventually become worthless except for the guaranteed death benefit. The guaranteed death benefit will decrease with each loss in the market down to the minimum level the insurance company allows.
A benefit of variable-term life insurance is that the money used for investing is untaxed until the life insurance policy is paid out. A variable life insurance policy has the potential to make money or lose money. There may be some additional protection features available to reduce your risk. Check and see if they are worth the extra cost.
Research companies that offer variable life insurance policies and ask if they have a policy that offers a hold on the value of the policy. This means that the insurance company will ensure the policy’s value stays within a certain amount. The hold amount only refers to the death benefit amount and not the policy’s total cash value.
If you choose to surrender your policy after several years, you can choose a policy that will allow you to turn your policy’s cash value into an annuity that gets paid out yearly.
Any investment comes with risks and the possibility of huge benefits. Before you decide whether or not a variable term life insurance makes sense for your overall financial goals, you should talk to a Registered Financial Consultant and make sure you understand all that is involved.
If you have any questions, please consider buying my book on Life Insurance. You may also contact me directly for assistance if you live or are near the metro-Nashville area. Suppose you are outside the middle Tennessee area and feel more comfortable with a fee-only Registered Financial Consultant (RFC) near you.
