Variable life insurance is similar to universal life insurance. As the cash value of your policy accumulates, you can modify your policy's death benefit.
The two main differences between variable and universal life insurance are: 1) Variable life does not have flexible premiums, and 2) Variable life allows you to invest in riskier investments such as stocks, bonds, and mutual funds. (Universal life insurance is generally restricted to safe investments that earn a lower rate of return.)
As a result of the riskier investments, your cash value is likely to fluctuate more with a variable life insurance policy. This fluctuation means your death benefit is more likely to change from one month to the next. You may share in the upside potential, but you also share in any downside potential.
Before buying a variable life insurance policy, you should be aware of the risks involved in investing. It pays to be familiar with basic investment principles. The above information is educational and should not be interpreted as financial advice. For advice that is specific to your circumstances, you should consult a financial or tax adviser.
Sunday, February 1, 2009
Policy Riders
A policy rider is a provision or modification to an existing insurance policy that provides additional coverage to an insurance policy. Generally, policy riders are sold separately from insurance policies.
Examples of riders include buying coverage to pay an accelerated death benefit, add your children to a life insurance policy, or to protect against an accidental death. A double indemnity rider pays twice the amount of the policy if you die accidentally.
A waiver of premium rider is a rider that lets you stop paying premiums for a policy if you become disabled for a sustained period of time before reaching age 60 or 65. The rider keeps your policy active by paying premiums for you. (In normal cases, a term life policy lapses when you stop paying premiums.)
Another example of a rider guarantees additional life insurance coverage without first having to obtain a certificate of insurability. (A certificate is often issued after you pass a physical exam.) This kind of policy rider is often called a guaranteed insurability rider.
You should evaluate whether a policy rider offers additional protection that you deem worth the extra expense. In some cases, a life insurer offers free rider coverage.
The above information is educational and should not be interpreted as financial advice. For advice that is specific to your circumstances, you should consult a financial or tax adviser.
Examples of riders include buying coverage to pay an accelerated death benefit, add your children to a life insurance policy, or to protect against an accidental death. A double indemnity rider pays twice the amount of the policy if you die accidentally.
A waiver of premium rider is a rider that lets you stop paying premiums for a policy if you become disabled for a sustained period of time before reaching age 60 or 65. The rider keeps your policy active by paying premiums for you. (In normal cases, a term life policy lapses when you stop paying premiums.)
Another example of a rider guarantees additional life insurance coverage without first having to obtain a certificate of insurability. (A certificate is often issued after you pass a physical exam.) This kind of policy rider is often called a guaranteed insurability rider.
You should evaluate whether a policy rider offers additional protection that you deem worth the extra expense. In some cases, a life insurer offers free rider coverage.
The above information is educational and should not be interpreted as financial advice. For advice that is specific to your circumstances, you should consult a financial or tax adviser.
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