Cost & Coverage
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Looking to build a tax-free inheritence and protect your family? Find out if variable life insurance is right for you.
Variable life insurance is a type of permanent life insurance, meaning it stays in force your whole life if you keep paying monthly or annual premiums. Variable life insurance is similar to whole life insurance—a simpler form of permanent life insurance—in that it pays a tax-free sum to your beneficiaries if you die, and in that it contains a long-term savings component called the “cash value” of the policy. However, unlike whole life insurance, variable life insurance offers you investment options for the policy’s cash value.
Variable life insurance is basically whole life insurance with added flexibility around how the policy’s cash value grows over time. Here’s a snapshot of variable vs whole life insurance:
|Variable Life Overview||Whole Life Overview|
|Guaranteed Death Benefit||Yes||Yes|
|Guaranteed Cash Value||No||Yes|
|How Cash Grows (or Shrinks)||Subaccounts - pool of investor funds offered by insurer||Earns interest at pre-determined rate|
|Notes||Risk of holding expensive insurance policy with little to no cash value||No risk compared to other permanent types, but there are probably better investment options|
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Variable life insurance premiums are much more expensive for the same death benefit coverage than term life insurance, which covers you for a set period of time—usually while you have dependents. It’s also a more complicated product than whole life insurance. While variable life insurance gives you some investment options for the cash you save over the course of your life, those options are still somewhat limited and are open to risk. Policygenius usually recommends term life insurance as the best choice for most shoppers.
Want to keep learning? Read our full analysis on the pros and cons of term life vs whole life policies.
For the majority of people, variable life insurance is neither a good life insurance product nor a good investment vehicle.
There are much better ways to invest than in a variable life insurance policy – ways that are cheaper, have a higher growth potential, and aren’t wrapped up in a complicated life insurance policy.
There is a small minority that may find variable life insurance useful due to its tax-deferred nature, but even in those cases, there are alternatives that may provide a better solution.
For the majority who won’t find variable life insurance useful, a much simpler and cheaper term life insurance policy is the way to go. In general, people should avoid combining insurance with an investment or savings component. If you’re trying to put together a long-term financial strategy that includes a variety of investments, you should speak to a financial advisor or tax expert.
You can get a variable life insurance quote from the insurance companies who offer permanent life insurance policies like variable life insurance, but we suggest speaking to an independent agent or broker instead. They can help you compare life insurance products from a variety of companies and help you decide which type of insurance or which policy you should purchase. In order to sell variable life insurance, a life insurance agent also needs to be licensed to sell securities.
Not sure what kind of coverage you need? Use our simple calculator to find out in 5 minutes.
A basic form of permanent life insurance. Whole life insurance offers death benefit coverage to beneficiaries that gradually reduces the insurer’s commitment as the policyholder’s cash value builds. Cash value earns interest at a fixed rate predetermined by the insurer.
Similar to whole life insurance, except it offers the policyholder the option to use the cash value to pay for premiums. The interest that the cash value earns is also subject to change with universal life, whereas it’s fixed with whole life.
A type of permanent life insurance usually used by seniors, final expense insurance is meant to cover any end-of-life costs and outstanding debts. Policies are typically sold for smaller coverage amounts—$10,000 or $25,000 for example.
Permanent life insurance for seniors who may not qualify for other kinds of life insurance. Policies are sold for smaller amounts of coverage — typically a maximum of $10,000 — and nearly all applicants are accepted. Premiums are expensive relative to the amount of coverage.
Many shoppers prefer to avoid permanent insurance policies altogether and instead opt to buy a term life policy and invest the rest of their savings in a retirement account such as an IRA or 401(k).
Learn more about term life insurance.
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Yes, we have to include some legalese down here. Policygenius Inc. (DBA Policygenius Insurance Services in California) (“Policygenius”) is a licensed independent insurance broker. Policygenius does not underwrite any insurance policy described on this website. The information provided on this site has been developed by Policygenius for general informational and educational purposes. We do our best to ensure that this information is up-to-date and accurate. Any insurance policy premium quotes or ranges displayed are non-binding. The final insurance policy premium for any policy is determined by the underwriting insurance company following application.
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