Variable Life Insurance
Life is an interest-sensitive form of insurance. It's purpose
is to combine the protection features of life insurance with
the investment potential of common stocks. The key to this
sort of policy is that the death benefit is completely variable.
The insured has the option of choosing between several different
investment mediums: stock funds, bond funds, real estate funds,
or any combination. These contracts do provide a minimum guaranteed
death benefit. The actual death benefit could be higher depending
upon the performance of the investment vehicle chosen. Because
it does rely upon the markets growth, the cash value
also fluctuates. There is absolutely no guarantee to the amount
of the cash value. Unlike universal life, the premiums paid
are fixed. There are policy provisions that allow loans to
be made from the cash value.
Ownership and Beneficiaries
is strongly advised that when purchasing life insurance an
attorney and or a Certified Public Accountant is consulted.
There are several crucial decisions that need to be made with
respect to the policy details. Although the policy may be
financial protection for your life, the owner of the policy
doesn't need to be you. In many cases it is beneficial for
your spouse, a trust, an estate or a business/corporation
to own the policy. The general rule that applies is that the
owner and beneficiary need to have an "insurable interest".
Simply put, that person or corporation needs to have a financial
interest in your living.
life insurance companies pay dividends to policyholders after
they have owned a policy for a specific period of time. Policies
with participating stock insurance companies and mutual insurance
companies sometimes pay dividends if the company is profitable
and declares a dividend. Dividends are in no way and under
no circumstances guaranteed and are only one factor in determining
the potential value of a policy. The Internal Revenue Service
has considered dividends on life insurance policies to be
a return of excess premium and therefore not a taxable event
(Consult your tax Advisor).
what your grace period is and make certain that the insurance
company receives your premium on time. Coverage can be canceled
if premiums are not paid on time. It is possible reinstate
coverage if this occurs, but if you need it badly you will
most likely be denied.
for all options of paying your premium (monthly, Electronic
Funds Transfer, quarterly, semi, annual, and annual) in order
that you may evaluate your options carefully. Discounts are
generally given for EFT and annual modes of premium payment.
your policy carefully. Among typical exclusions are suicide,
death while in the commission of a felony and death that occurs
as a result of an act of war, but a few exceptions exist.