Business, Legal & Accounting Glossary
Variable life is a type of whole life insurance that allows one to invest in various combinations of stocks, bonds and money market funds (chosen from the funds offered by the insurance company). The cash value of variable life is dependent on the performance of these investments, though the death benefit of variable life insurance won’t drop below a certain minimum. Returns from variable life aren’t guaranteed, and the policyholder assumes the risks rather than the insurance company. Due to the investment risks, variable life policies are considered security contracts; this means that variable life must be regulated under federal securities laws. Agents who sell variable life, for example, must be registered representatives of a broker/dealer licensed by the NASD and registered with the SEC. An advantage of variable life policies is that the policyholder isn’t taxed on the earnings until the policy is surrendered. Interest earned on the investments may also be applied to the premiums of variable life, which could lower the amount the policyholder pays.
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This glossary post was last updated: 5th February, 2020 | 0 Views.