Variable Insurance Policies
Investment
- In a variable life policy, a portion of the premium payment pays for the death benefit, while the remainder goes into an investment account. Investment instruments may include money market funds, stocks, bonds and equity funds. Policy owners determine how to invest the money, with distribution into one or more investment instruments in the insurance company’s portfolio.
Fund Performance
- If the investment instruments perform poorly, the death benefit component of the policy may decline. The terms of a variable life insurance policy include a defined limit for the death benefit component, under which the payout to a beneficiary will not decline. If the the investments perform well, the account will accumulate a profit on the investment component.
Payout
- The variable life policy is intended as a death benefit and policyholders cannot withdraw funds from the policy, according to Investopedia.com. When the policyholder dies, the beneficiary receives both the death benefit and the investment funds.
