Variable Life
Variable life is a type of permanent insurance that allows you to invest the cash value of your policy in stocks, bonds and money-market investments. The investments typically resemble mutual funds in the diversity of their holdings. Premiums are fixed, and a share of them is allocated to the investment portfolio. The cash value and death benefit fluctuate with the performance of the investment portfolio. A similar alternative, variable universal life, offers flexibility not only in investment choices but also in the amount of the premiums you are required to pay each month. If you make wise investment choices and the securities markets are favourable, you can receive a higher return than the low fixed rates of return offered in whole life policies.
These kinds of plans vary from country to country. In India, for instance, insurance firms offer a product similar to variable life called a unit linked insurance plans (ULIP). These plans have a life insurance component and an investment component. The premiums are invested in a fund—debt, equity or a combination of the two chosen by the policyholder, and returns depend on the performance of the fund. Also popular are endowment policies, where some part of the premium is invested—usually in government securities—and bonuses are paid either when the policy matures or when the individual dies.
