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Insurance
Variable Life Insurance |
Variable life is the third
variation of cash value insurance. This type of policy is designed for investment growth.
Unlike whole or universal life policies, you're given a list of investment choices to
place your cash value. These options include stock, bond, and money market mutual funds
made available by your insurance company.
Being able to select investments means it's possible your cash value will grow at faster
rate than it would in another type of plan. But it's also likely your investments will not
pan out -- resulting in a loss. Variable life insurance is not for the passive. You have
to be willing to monitor your investments more closely and assume some of the additional
risk.
Advantages:
- Policy doesn't need to be renewed.
- Fixed premiums.
Choice of investment options.
Tax-deferred earnings.
Option to borrow against cash value.
Drawbacks:
- No option to withdraw cash value.
- Administrative fees are somewhat higher.
- You must monitor your investments more closely.
- You have to assume the risks
for the investments chosen.
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