What Can Variable Whole Life Insurance Be Described As?


Variable life insurance is a distinct category within permanent life insurance, offering both lifelong protection and the potential for cash value accumulation.


While the death benefit and premiums remain fixed, the cash value fluctuates based on the performance of underlying investments.

This insurance type is well-suited for individuals seeking the security of a death benefit while embracing the potential for higher returns.

Often referred to as variable appreciable life insurance, it combines lifelong coverage with segregated accounts holding various investment instruments, including stocks, bonds, equity funds, money market funds, and bond funds.

It’s important to note that variable life insurance policies offer greater potential for gains than other forms of permanent life insurance, granting policyholders the freedom to choose how their cash value is invested.


However, it’s essential to exercise caution, as variable life insurance policies often come with higher fees compared to other cash-value life insurance policies.

If you want to delve deeper into variable whole life insurance policies, you’ve come to the right place.


We’ve compiled all the relevant information to help you understand the intricacies of variable life insurance. Don’t waste any more time—let’s embark on this informative journey.

Understanding Variable Life Insurance

Variable life insurance is a unique blend of a permanent insurance policy and an investment component. It features a cash value account that invests in various sub-accounts within the policy.

These sub-accounts function similarly to mutual funds but operate exclusively within the framework of a variable life insurance policy. A typical variable life insurance plan offers several sub-accounts, sometimes with as many as 50 options.

The cash value account can grow as the underlying investments in the sub-accounts perform well. Conversely, a decline in overall investments can lead to a reduction in cash value.

The policy forms a contractual agreement between you and an insurance provider, serving various purposes, including insurance coverage, investment objectives, and tax planning goals.

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Upon your passing, the policy pays out a designated sum to your beneficiaries, whether your family or others.

Additionally, it includes a cash value that fluctuates based on premiums paid, policy-related fees, and the performance of various investment options, typically mutual funds offered within the policy.

Like whole life insurance, it provides lifelong protection through death benefits and fixed premiums while building cash value.

This policy remains in effect throughout the insured individual’s lifetime as long as premiums are paid annually to keep it in force.

If you don’t require lifelong insurance coverage or are averse to investment risk, this coverage may not align with your needs.

Key Elements of Variable Whole Life Insurance

Variable whole life insurance includes the following elements:

  • Assured Minimum Death Benefit: This benefit, contingent on consistent premium payments, guarantees a stable death benefit amount.
  • Stable Premiums: Premiums are invested in the insurance company’s general account, ensuring consistency.
  • Cash Value Accumulation: The policy’s cash value accrues with tax deferral, although not guaranteed.
  • Potential Dividends: If applicable, dividends can be used to acquire additional insurance coverage or boost the cash value.
  • Payment Schedule Flexibility: Policyholders can choose from various payment schedules, such as annual, semi-annual, quarterly, or monthly.
  • Costs and Fees: The policy is subject to death rates, administrative charges, and fees.
  • Investment Options: Funds can be allocated across various investment options with varying levels of risk and rewards, including stocks, bonds, or a fixed account that guarantees principal and interest.

Exploring the Traits of Variable Whole Life Insurance

Variable whole life insurance possesses distinctive characteristics that set it apart from traditional whole life insurance policies.

It offers enhanced flexibility in utilizing and accessing death benefits, with payouts subject to fluctuations based on the performance of the underlying investment account.

Understanding the Mechanics of Variable Life Insurance

Variable life insurance can sometimes resemble an investment itself due to the consideration of investment risks. These policies are classified as insurance contracts and are subject to federal insurance regulations due to these risks.

Sales professionals must provide potential buyers with a list of available investment products in compliance with these regulations.

The policies offer specific tax advantages, such as tax-deferred accumulation of earnings. If the policy remains in force, policyholders can access the cash value through a tax-free loan.

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However, outstanding loans – both principal and interest payments – reduce the death benefit. Moreover, premiums or earnings involved in partial and complete surrenders of the policy are taxable upon distribution.

The cash value of the policy is invested by directing premiums into an account. Policyholders can select which investment vehicles or sub-accounts, such as mutual funds, to allocate these funds to. The growth of your insurance’s cash value depends on favorable market performance.

Conversely, if the market underperforms, your policy’s cash value may decrease, potentially providing you with fewer resources accessible through borrowing, withdrawal, or redirection toward the policy’s death benefits.

Additional Dimensions of Insurance

Variable life insurance policies offer additional dimensions, each coming with associated costs and fees:

No-lapse Features

These features maintain the policy’s validity even when the account lacks sufficient funds to cover the policy’s expenses. However, opting for a no-lapse feature can significantly reduce the death benefit.

Disability Rider

This rider ensures the policy remains enforceable if you become disabled and cannot meet your premium obligations.

Accelerated Death Benefit

In case of chronic or terminal illness, this feature allows the payment of a portion of your death benefit while you are still alive.

Long-term Care Insurance

This provision addresses expenses related to long-term care.

Income Benefit

It provides you or your beneficiaries a predetermined minimum monthly income over a specific period.

Additional Term Insurance

The policies often include the option to add supplemental term insurance for yourself or your family, offering coverage for a defined period.

Accidental Death Benefit

This feature provides an additional death benefit if your demise occurs due to an accident.

Unveiling the Traits of Whole Life Insurance

Whole life insurance possesses specific universal attributes typically sought when making investment decisions or selecting financial instruments for your portfolio.

  • Security: Whole life insurance offers financial security, providing lifelong coverage with guaranteed death benefits.
  • Control: Policyholders have control over their policies, with the ability to access cash value and make decisions regarding their coverage.
  • Growth: The cash value component of whole life insurance policies grows over time, providing potential for financial growth.
  • Legacy Establishment: Whole life insurance allows you to leave a legacy for your beneficiaries, ensuring they receive a financial benefit upon your passing.
  • Liquidity: Policyholders can access the cash value of their life insurance policies for various financial needs.
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Furthermore, whole life insurance boasts several features that distinguish it from term life and other life insurance forms, including:

  • Collateralization Against Cash Value: The cash value of a whole life insurance policy can serve as collateral for loans or withdrawals.
  • Accrual of Cash Value: The cash value component of a whole life insurance policy accrues with tax deferral, offering growth potential.
  • Uniform Premiums: Premiums remain consistent throughout the policy’s life.
  • Permanent Coverage: Whole life insurance provides permanent coverage, ensuring the policy remains effective as premiums are paid.
  • Dual Role as an Investment Vehicle: In addition to insurance coverage, whole life insurance policies act as investment vehicles, accumulating cash value.
  • Payout of a Death Benefit: Whole life insurance guarantees a death benefit payout to beneficiaries upon the policyholder’s passing.

Based on Premium Type: Variable Whole Life Insurance

When considering the basis of premium formulation for variable whole life insurance, it’s important to understand that it relies on level-fixed premiums.

These consistent premiums remain unchanged throughout the policy’s duration while the coverage increases.

This premium structure is similar to a term life policy, although the cash value component grows as expenses decrease within a whole life insurance policy.

Each time a premium payment is made, a portion goes toward insurance costs, while another contributes to the cash value.

Maintaining the integrity of the death benefit is essential, and the policy remains in force as long as regular premiums are paid.

Advantages of Variable Universal Life Insurance

Variable universal life insurance offers several advantages, including:

  • Use of Cash Value as Collateral: The policy’s cash value can be collateral for loans or withdrawals.
  • Flexible Use of Withdrawn Funds: Funds withdrawn from the cash value account can be used for various purposes, including discretionary spending or supplementing retirement income.
  • Potential for Enhanced Financial Value: Compared to certain other life insurance forms, investment options within variable universal life insurance have the potential to generate greater financial value.
  • Diversification of Financial Strategy: Variable universal life insurance allows policyholders to diversify their financial strategy by choosing from various investment options.
  • Tax-Free Death Benefit: Beneficiaries receive the death benefit tax-free.
  • Life Insurance Riders: Variable universal life insurance policies often offer riders that enhance policy benefits, including riders for chronic illness, critical illness, or terminal illness, which allow access to the death benefit if diagnosed after policy acquisition.


Now that you’ve gained insight into the essence of variable whole life insurance, you can evaluate its advantages and suitability for your circumstances.

Armed with this knowledge, don’t hesitate—seize the opportunity to secure variable full life insurance without delay.

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