Best Life Quote

Variable Life Insurance: Stay Away

Written By Doug Mitchell

Doug Mitchell, CLU holds a BA degree in Finance from Auburn University as well as having obtained a Chartered Life Underwriter (CLU) designation from The American College in Bryn Mahr, PA.  Doug has spent close to 30 years in the insurance and financial planning industry and has held licenses to sell securities, long-term care insurance, health.  Doug is also a financial blogger addressing the topics of life insurance, annuities and retirement income planning.

Holly Mitchell  &

Holly Mitchell’s background in life insurance insurance goes back to 1985 when she worked for her father who was a New York Life agent. Holly has a marketing degree from Auburn University and has had a life insurance license since 2008. In addition to advising life insurance for customers all around the country, Holly is our website fact checker.

Rob Pinner   &

Rob Pinner is the founder and CEO of Pinner Financial Services servicing all 50 states. Rob started his insurance career in 2002.

Louis LaBash

Results-driven and innovative life insurance professional with 30 plus years of life insurance industry sales and marketing experience. Recognized as a pioneer in the field, leveraging phone and internet channels to exceed personal sales of over $100 million during the first decade of the 21st century. Creator of a highly effective intuitive IUL life insurance sales software that facilitated the sale of millions of dollars of indexed universal policies by numerous life insurance agents. Proven track record as a Managing General Agent (MGA), Life Agent, IUL Life Insurance Sales Software developer, and leading-edge creator of insurance marketing tools, educational content, and delivery systems.

Table of Contents

Life insurance is unique in that— unlike other forms of insurance— the policyholder is not the person who is protected. Instead, it is the beneficiary (or beneficiaries) who is protected when the policyholder passes away.

Basically, you buy life insurance for your loved ones, not for you. Variable life insurance, which is designed to build cash value, doesn’t necessarily guarantee that your loved ones are protected, and it is for this reason that you should stay away from it.

What is Variable Life Insurance?

A good amount of people feel that if they’re going to pay money for life insurance anyway, why shouldn’t part of that money be put into investments to hopefully build up cash value over time?

Contrary to what these people will tell you, life insurance should primarily be used for protection— not for an investment. Furthermore, variable life policies tend to have rather limited investment options to choose from.

If you want to build cash value, it is far more effective to focus your investments on more reliable accounts like 401k, IRAs, stocks, bonds, and mutual funds.

Variable Insurance Policy or Whole Life

piece of paper with hand and ink pen writing say no

Some people feel they need a variable life policy because they want a lifetime policy and it is a form of permanent life insurance. The problem with variable life, however, is the fact that it only pays out a death benefit so long as there is enough cash value to pay for the costs.

This is because the money you put into a variable life policy is divided up into three portions: part of it goes towards your chosen investments, part of it goes toward the actual life insurance policy, and a good portion of it goes to fees. As you’ll see later on, these fees are what can really drain the value of a variable life policy.

Variable Life insurance Policies are Confusing

Buying life insurance can be confusing. Buying term insurance is simple, variable life insurance isn’t as straightforward. Even people who understand the jargon, navigating the complexities of universal life insurance can be an exhausting journey.

We want our clients to fully grasp the coverage they are getting and the benefits of their policy versus buying a different plan. We go to great lengths to explain the plans and the options.
When it comes to variable life insurance, explaining the coverage isn’t easy. It takes a seasoned insurance pro to buy and make the most of these plans.

Investing with Variable Life Means Gambling

With term life, the amount of coverage you get is consistent as long as you pay your premiums. With variable life, your policy is not as straightforward. Since a portion of your money goes towards investments rather than directly to insurance, the cash value of your policy is dependent on how these investments perform.

As with all kinds of investments, this is always a gamble, as they could perform well or really poorly. Making educated decisions always helps when choosing where to invest your money, but even the most “predictable” funds are subject to change.

As you get older the cost of insurance increases and there is more pressure on the investments to perform, to keep up with the increased cost of insurance. A bad market could result in a very small payout, if any, for your family.

Fees with a Variable Life Insurance Plan

Here’s where the real catch is— variable life policies are subject to numerous fees. Even if you get the policy and quickly realize that it isn’t for you, guess what, you’ll be slapped with surrender penalties.

You’ll have to hold on to that policy for at least several before you’ll be able to let go of it without having to pay a hefty fee, and this, of course, means having to continue paying for the policy. If this sounds like a trap, it’s because it is.

When we’re shopping around for life insurance, we find the plans with the least amount of fees. We don’t believe policyholders should be bogged down

Variable Insurance Policy Alternatives

Instead of wasting money on a bunch of benefits you don’t need, we suggest buying a term insurance plan and investing “the rest.” Term insurance policies are cheaper and easier to understand.

You won’t get the savings/investing component with a term plan, but you’re going to save a significant amount on your premiums. For 99% of the people we talk to, we recommend NOT buying a variable life insurance plan. Instead, we help them find a term insurance plan which is cheaper.

With the leftover money, they would spend on buying a variable insurance plan, and invest the rest of the money. This allows you to get insurance protection and still get the investment. Doing it this way saves all of the fees you’d pay with a variable life insurance policy.

There is a reason term insurance is the most popular option for insurance. Now, every family is different, we don’t want to make any blanket suggestions, but term tends to ALMOST always be the perfect option.

Don’t Buy Variable Life Insurance

So, it is best to avoid variable life insurance altogether and not gamble with the futures of your loved ones. A guaranteed universal life policy also offers permanent life insurance, without the high risk of a variable life policy.

Even so, term life policies generally meet the needs of most people, and they are often the cheapest forms of life insurance policies.

Variable and term insurance are only two of the options. Term MIGHT be the best, but you’ll need to check out all the choices.

If you want some help picking a plan and comparing all of the options, let one of our independent insurance brokers do some of the work for you.
Here is the thing which sets us apart: we are uncaptivated agents.

What does this mean? It means we can shop around with dozens of companies before making any recommendations. We aren’t going to give you one quote and then try and force you to buy it.

If you still have questions about variable life insurance or you want to compare the possible plans for you, go ahead and call us.

We would be happy to walk you through the process of getting quotes, comparing the options, picking a plan, and applying for the policy. We will help you from beginning to end.

When you’re ready to talk about your life insurance options, please feel free to contact us at 800-712-8519, or compare rates on this page. We’re here to help you find the most affordable insurance coverage that suits the needs of you and your family.

Picture of Doug Mitchell, CLU

Doug Mitchell, CLU

Doug Mitchell, CLU holds a BA degree in Finance from Auburn University as well as having obtained a Chartered Life Underwriter (CLU) designation from The American College in Bryn Mahr, PA. Doug has spent close to 30 years in the life insurance and financial planning industry and has held licenses to sell securities, long-term care insurance, health. Some other notable items about Doug: Top of the Table Million Dollar Round Table member (MDRT). (MDRT is a global, independent association of the world’s leading life insurance advisors) | Premier Partner with Lincoln Financial and Cabinet Member | Served two years as President of the Auburn/Opelika Association of Financial Advisors | Life Millionaire status at Horace Mann Insurance Company and was awarded the Life Agent of the Year Award | New York Life, Executive Council Member | Currently serves as President of Ogletree Financial, a life insurance General Agency. | Doug is also a financial blogger addressing the topics of life insurance, annuities and retirement income planning.

Get your Quote