I started Insurance Blog by Chris™ because I have a passion for insurance. Here at the blog, our job is to educate and inform people about the best insurance for them. Since then, we have grown into national brands with a large team of researchers helping people understand all forms of insurance.

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Written by Chris Huntley
Founder of Huntley Wealth & Insurance Services Chris Huntley

Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health insu...

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Reviewed by Rachael Brennan
Licensed Insurance Agent Rachael Brennan

UPDATED: Nov 19, 2021

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You might not realize it, but there are many different types of life insurance available in the marketplace today.

Sifting through all the options to find what’s right for you can be challenging, and keeping track of all of the different terms can prove almost impossible.

Variable life insurance is a type of permanent (i.e., not “term”) life insurance policy that, among other things, provides a death benefit to beneficiaries.

Permanent life insurance policies are available for longer than a finite term. As long as they’re in good standing, they will pay out to beneficiaries whenever the policyholder dies. There is no set window for this policy.

Permanent life insurance policies have a cash value that term policies lack. This is handled in different ways for different types of permanent policies.

Table of Contents:

Variable Life Insurance Death Benefit

As a form of permanent life insurance, the death benefit from variable life insurance will pay out no matter when the policyholder passes away, so long as the policy is in good standing.

By contrast, a term policy would expire once the term passes. If somebody purchases a 30-year policy when they’re 25, for instance, the term would expire when they’re 50. If they had purchased variable life insurance instead, or another permanent plan, the term would never expire.

Additionally, for a rider with higher premiums, some variable life insurance plans allow you to transfer the cash value of the policy, in addition to its face value, to your beneficiaries, though this is not a standard feature.

For some policies, the cash value of the account might supplant the death benefit entirely.

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Variable Life Insurance Cash Value

Among permanent life insurance products, variable life insurance typically has greater potential growth.

With other products, the cash value sits in something like a savings account. The returns on this cash value account are generally steady but lower in total value.

As with saving versus investment, the investment carries a greater potential reward along with its risk.

While the investments are managed by the insurance company, you get a say in the investments they choose for your money.

If growth is significant, and you have other plans for your estate instead of packing the cash value into a death benefit, you could surrender the account, but the fees will certainly be significant.

Variable Life Insurance Cash Value Growth Is Tax-Deferred

In most circumstances, for a variable life insurance policy, if you leave your gains in the account, you won’t have to pay taxes on them as they accrue. Advocates of this policy often tout this as a huge advantage for this type of life insurance plan, even referring to it as a super IRA.

As long as you have a high enough income, you start investing at the right time, and your health is good enough for a strong underlying life insurance policy, variable life insurance could be a good tax-advantaged way to invest for your retirement. This is what makes variable life insurance distinct and attractive to some people who are weighing all of their options for retirement financing.

Flexible Uses For The Cash Value of Variable Life Plans

In addition to covering the premiums of your life insurance policy, your policy’s cash value can have other uses.

Perhaps most obviously, you might be able to work with your insurance company to increase the death benefit, provided your plan doesn’t already give the cash value of the account to your beneficiaries.

There are many other uses, however. You can take out a loan against the cash value of your life insurance policy for more favorable terms than you might be able to establish elsewhere, and you might not be required to pay it back. You can also make withdrawals, or even surrender the policy and cash out.

On its own, the tax-deferred cash value of the policy could be a significant component of a fuller investment portfolio.

Variable Universal Life Insurance Comes With Flexible Premiums

A specific subtype of this policy, known as variable universal life insurance, allows you to alter the amount you pay on premiums for the policy each month.

To help you start saving more quickly, you can overfund your cash value early on, allowing gains to accumulate faster. Once the cash value of your account is high enough, it can be used to reduce the amount you spend on your regular premiums, or to cover them altogether, eliminating the need for regular premium payments on your part.

Some insurance companies may even allow you to pay all of your premiums upfront if you have the financial reserves to do so.

How Do I Find Variable Life Insurance?

If you’ve taken stock of all the risks and opportunities presented by this financial product and decided that variable life insurance could be the right life insurance policy for you, there are a couple steps to take before you start your policy.

First of all, you’ll likely want to work with an independent agent instead of going it alone. Find a reputable partner if you don’t have existing skilled financial planning support that can give you impartial recommendations on this complicated product.

Before purchasing a policy like this, as we’ve mentioned, make sure to have already maxed out other tax-advantaged retirement and savings plans.

You’ll also want to work with your agent and financial advisors to determine if a medical examination would be good for you before starting the policy. It might be required for your policy, but if not, you’ll want to carefully consider whether it’s to your benefit to accept the standard coverage and rates for your demographics, or if the medical exam could help you get a better plan.

Before you start your policy, carefully consider its terms, including the death benefit, how it can be altered, restrictions on the use of your cash value in the future, and the investment options available through the insurance company.

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Is Variable Life Insurance For You?

Variable life insurance is a complicated financial product, but its tax-advantaged nature, and the ability to provide a substantial death benefit to dependents and other beneficiaries, could make it an attractive investment opportunity for certain people.

Whether you’ve decided the right life insurance type for your needs is variable life insurance, a different permanent policy, or term life insurance, we’d like to share with you our research on the best life insurance companies.

Learn more about your options and get quotes today.