Variable life insurance is a life insurance contract that provides a death benefit to your survivors when you die and has a cash value component that you can invest. The cash value grows based on your investments’ performance.
But because your cash value fluctuates and can drop in a bear market, variable life insurance is riskier than other types of life insurance.
We’ll explain how variable life insurance works, the pros and cons, how it compares with other types of life insurance, and some factors to consider before buying a policy.
How does variable life insurance work?
When you buy a variable life insurance policy, your insurance company uses the premium to insure your life and pay for its administrative costs, plus profits. In the early years of the policy, the amount the insurer charges you for premiums often exceeds these costs.
