Variable life insurance is a type of permanent life insurance that provides flexible cash value accumulations and a death benefit that is guaranteed to be at least equal to the face value of the policy. Unlike most other types of life insurance, variable life insurance policies are considered securities because the policyholder bears investment risk.

Variable life insurance is a complex product that carries significant risk. This type of life insurance is not suitable for everyone so policyholders should be sure to research possible outcomes and understand the benefits and drawbacks before purchasing a polcy.

Variable life insurance is unique due to its three separate accounts: a death benefit account, a cash account, and a variable investment account. The death benefit account provides a guaranteed minimum death benefit which is determined at the policy’s outset. It is aimed to cover the policyholder’s burial costs and other debts. The cash value is the amount of money that accumulates from policyholders premiums and is not subject to market fluctuations. It can be used to pay the premiums or be taken as a loan against the value of the policy. The variable investment account is where policyholders can invest in separate funds like stocks, bonds, and mutual funds.

Variable life insurance also carries many tax advantages. Money in the cash value account grows tax-deferred, meaning it is not subject to taxes in the growth stage. When a withdrawal is made, taxes will eventually be applied. In addition, if a policyholder passes away, their beneficiaries are not subject to taxes on the death benefit received.

Just like other forms of life insurance, variable life insurance should be purchased with the aim of protecting one’s family in case of death. People should consult a financial professional to understand the complex nature of the product and determine if it is suitable for their individual situation.