Variable life insurance goes by a few names such as variable appreciable life assurance, or variable universal life insurance is life insurance that builds a cash value. The policy holder then can invest this cash value in separate accounts, which are similar to mutual funds, that are contained within the insurance company’s portfolio.
Having the option to invest in different accounts means that with the right investments your cash value can grow larger compared to other permanent types of life insurance policies. This cash value is considered tax-deferred earnings and also offers the option to make tax-free transfers among the investment portfolios.
Variable life insurance guarantees its payout as long as the cash value is sufficient to cover the costs of insurance in the policy. Because the cash value and your death benefit fluctuate based on the performance of your investments, you are assuming some investment risk. If you rely on your investment funds performing at a certain level to earn interest, then a poor performance can mean less available cash which can make affording your premiums, and not forfeiting your policy, a challenge.
As different insurance companies offer their own variations of this type of policy, your best option is discussing the options with a certified financial professional. LifeCover.ca specializes in connecting Canadians with insurance professionals through our large network of independent brokers. If it’s insurance related, we can help.