How to Find the Top Variable Life Policies

Finding the top variable life policies involves understanding the dynamics of the policy. Variable policies, which can have whole life or universal life as the underlying policy, pay a death benefit and build cash value over time. Part of the premium that is paid by the policyholder is applied toward the cost of providing the insurance. In other words, based on the actuarial tables used by the insurance company, a calculation is used to determine how much it costs the company to pay the death benefit to the beneficiary. This is based on a number of factors, not the least of which is the age of the policyholder at the time the policy is issued.

The balance of the premium is applied to the cash account. A policy is "variable" if the money is invested in accounts that function much like mutual funds, and the return earned is based on the gains or losses in the financial markets. Unlike a standard whole life policy, the owner of a variable policy elects to invest his or her money based risk-tolerance, diversification of other assets and whether or not a reduction in the death benefit can be tolerated.

Consumers interested in the top variable life insurance policies should seek the expert advice of both a Certified Financial Planner (CFP) and an experienced life insurance agent. Insurance agents who sell variable life policies must be registered with the Securities and Exchange Commission (SEC) and the National Association of Securities Dealers (NASD). Further, the life insurance company must be a member of the Securities Investor Protection Corporation (SIPC), as the Federal Deposit Insurance Corporation (FDIC) does not insure variable life insurance policies.

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How to Select the Top Variable Life Investment

Life insurance companies offer a number of different investment options for those interested in the top variable life policies. These options range from conservative to aggressive, domestic to foreign and growth to emerging markets. The insurance company is responsible for managing the investments, even though the policyholder selects them. Most insurance companies charge management fees to provide this service, but policyholders should know that the management teams are comprised of financial professionals who take the fiduciary responsibility they have for their clients very seriously.

Many insurance companies offer the choice between a fixed death benefit and a variable death benefit. Again, this should be considered very carefully. A fixed death benefit will pay the beneficiary a fixed amount. That is to say, the death benefit is not increased or decreased by the performance of the investments. Even if the investment account is depleted, the beneficiary receives a guaranteed amount. A variable death benefit, however, does pay the amount, if any, that is in the cash account at the time of the policyholder's death. If the value of the account has dropped significantly, this can create a burden on the beneficiary and surviving family members.

The investments made through a variable life policy are never mixed with the investments of other policyholders or with funds that are part of the insurance company's general account. This is important to know when researching the credit ratings of the top variable life companies. The ratio of cash to possible obligations is just one of the criteria the credit ratings agencies use to assign a rating. One strong indicator of a company's ability to pay claims is its past history of paying claims. And, insurance companies are not allowed to leverage their holdings.

The Benefit of the Top Variable Life Insurance Policies

One benefit of the top variable life insurance policies is the ability to adjust the amount of the premium. A policyholder can choose to pay less than the amount due while maintaining the security of the policy. If he or she is short on cash due to the loss of a job, illness or other financial hardship, he or she can make a smaller payment. The death benefit remains in place, which means that even though the premium is smaller, the beneficiary and surviving family members will still be protected.

This flexibility is extremely beneficial during an economic downturn. Statistics from a number of insurance groups indicate that the purchase of permanent insurance policies is on the rise. As more and more families struggle to make ends meet, insurance policies are providing necessary coverage. However, those interested in the top variable life policies need to understand that during a market downturn, the balance of the policy can fall.

The Top Variable Life Policies and Suitability

The top variable life policies are those that meet the needs of the policyholder and his or her family while providing affordable coverage. Each family will have different needs and each family will need to weigh the pros and cons. But, for policyholders with additional sources of liquid cash, such as savings, checking and money market accounts, the potential growth of a variable policy can help to secure a financially stable retirement.

The earnings on the top variable life policies grow tax-deferred. Even if the policy is purchased with after-tax dollars and is not part of an employer or self-sponsored retirement plan, taxes are not due on the earnings until the policy is surrendered by policyholder or until the death benefit is paid. Policyholders typically do not pay federal income tax on any money that is borrowed from the policy. Most insurance companies allow a policyholder to borrow an amount that is equal to the amount of premium that has been paid in. Money can be borrowed for any reason, including the down payment on a house, a child's college tuition or medical bills.

In most cases, the death benefit paid on the top variable life policies is not subject to federal taxes. Wealthy families with significant assets will often purchase variable life policies to ensure that children and grandchildren will have ready cash available to pay inheritance taxes on other assets, such as cash, stocks, bonds and property. Parents can also purchase policies for their children and fund them as they see fit.

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