What Is Variable Life Insurance?
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Variable life insurance is a form of whole life insurance that has an investment portion attached to it. The owner of the insurance policy has flexibility to determine how the cash portion of the policy is to be invested.
This type of life insurance policy has sub-accounts, which enable a number of investment options. The cash value can be divided up into various holdings of the insurance company, which enables owners to invest in stocks, bonds, mutual funds, and more. Money earned from these investments is tax-deferred until withdrawn. Investopedia mentions that this money can be withdrawn tax-free later if done so through loans used as collateral, instead of the more common method of withdrawals.
The policy owner can change the amount of money going towards the premium and towards the investment portion of the policy. If the investment portion is not doing well, however, more money may need to be put into it. There are no guarantees except that of a minimum amount of interest. This type of policy has to be sold with a prospectus and falls under the SEC.
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