Introduction to Variable Life Insurance by Barry Waxler

Sometimes when you are considering Life Insurance you are reminded of the old saying, "you can't tell the players without a scorecard!" Variable Life Insurance is a good example of a confusion causer, but it is really a rather simple one to understand.
Variable Life Insurance is simply a policy that grows cash value. What is different about Variable Life is that you are allowed to select the investments for the cash value as it grows. You are usually given a wide variety of investment options and can move your investments between options several times a year. This is usually very satisfying to a person as many people feel better when they are controlling their own fate.

A Variable Life Insurance policy is considered a security instrument in much the same way as a mutual fund. It is therefore subject to regulation by the SEC as well as the Internal Revenue Service. Despite this, it is first and foremost an Insurance policy. This is the important point to remember. As such, it has a set amount that is payable to a designated beneficiary upon your death. The amount of this death benefit should be set depending on your own personal financial situation and the impact your death would have on your dependents.
With a Variable Life Insurance Policy, once you have determined the amount of protection you need and determine the amount that should be paid in the event of death, you are then able to determine a premium payment amount. The premium amount will actually be more than just the cost of the insurance coverage. This is the whole point of the Variable Life type policies. The excess premium is what is going to be invested and will earn income.
The way to view this is to see the Variable Policy as a multiple purpose financial tool. It provides a savings vehicle whereby a certain portion of your funds are set aside for use later or in emergencies. This is possible because it is possible to borrow against the cash value of your policy. As long as you pay back the borrowed funds in a timely manner, the insurance aspect of the policy remains in force. At the same time, the policy is an investment vehicle. The Variable Life is an investment vehicle with you behind the wheel which is an added advantage.
But, underneath it all, it is an Insurance Policy with the primary goal of risk management against the uncertainty of mortality. This is the prime purpose of insurance. Some people ask why not just get Term Insurance, pay a lower premium, and be done with it. The wise financial planner realizes that the process calls for a coordinated plan. Yes, you need Life Insurance. Why not let it work for you so you are a winner if you are lucky enough to live a long life.
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