What Is Variable Life Insurance?

Life insurance is a contract, referred to as a policy, between a policyholder and their life insurance company. Upon the death of the insured, the insurance company agrees to pay a death benefit, frequently a lump sum, to the insured's beneficiaries. The insurance policy is upheld for an agreed-upon amount of time, and the policyholder maintains it with a monthly premium payment.

Like any purchase, buying life insurance only makes sense if you actually need it, but it's important to realize that your premiums will be tied to your age. The older you get, the more expensive life insurance becomes, particularly past age 35. Many younger people forgo life insurance in favor of settling other debts, but having a life insurance policy makes sense for anyone with financial dependents like a spouse or children. Without a death benefit, your dependents will likely have a difficult time with funeral expenses, not to mention other costs. There are several types of life insurance policies that can suit your specific needs. Compare types of life insurance with iSelect to see what works for you.

Term Life vs Whole Life

While there are several types of policies, they can be broken down into two basic categories:

Term Life Insurance: A term policy is a type of coverage that lasts for a specific period of time in exchange for a fixed premium. Term life policies generally last for increments of five years, but it may be possible to find shorter-term options in exchange for higher premiums. Term insurance is often favored for a few reasons, mostly because of its simplicity and generally cheaper rates. This makes term life insurance policies particularly attractive for younger families who are still dealing with other debts like mortgages.

Whole Life Insurance: Whole life policies, also called a permanent life insurance policy, last for the policyholder's entire lifetime. Having a permanent policy can certainly provide a sense of security, although permanent life insurance typically comes with higher premiums. Whole life insurance provides more than a death benefit payout, though. Whole life policies have a cash value component that accumulates over time. Once the cash value is great enough, you can make withdrawals or borrow against it when needed. A policy's cash value will depend on the insurance company, type of policy, and interest rates.

Variable Life Insurance

A variable life insurance policy is a type of permanent policy with cash value sub-accounts that act like mutual funds. Benefits of variable policies are often combined with universal life insurance, an option typically sold in the United States that transfers premium payments above the current cost of insurance to the policy's cash value.

This makes variable universal life insurance advantageous in that it can generally acquire value faster than other policies. There are several pros and cons for variable life policies, though. The biggest downside is that variable policies tend to have the highest fees in the life insurance coverage options. This means a higher premium amount, but there are also fees associated with withdrawals, loans, and insurance agents. It may be a good idea to seek the help of a financial advisor to decide if a variable universal life plan is good for you.

Applying for Coverage

If you're interested in getting life insurance, the application process is relatively simple. You can get quotes online or speak to an insurance agent over the phone to get started. They'll need to know the coverage amount you're looking for, and they'll ask some basic questions about your medical history. Once your official application is done, you'll have a brief medical exam to confirm your eligibility and determine your premiums. Once this is done, the underwriting process begins, and your policy will be finalized.