YOU ASK:

What are the main characteristics of variable whole life insurance?

WE ANSWER:

As the name suggests, variable whole life insurance provides much more flexibility than the traditional ordinary life insurance. As a variation of whole life insurance, the variable life policy has fixed premiums, but customers have a bigger selection of investment options for their cash value, including investing it in the stock market.

Here are the basic features of variable whole life insurance:

Variable whole life insurance policies are permanent whole life contracts with fixed level premiums that are not subject to increasing.
The whole of the legal reserve is retained by the insurance company in a separate account and can then be invested in stocks or other investments, such as a bond fund, a common stock fund, a balanced fund, a money market fund, or an international fund. This gives policy owners the chance to outperform what they have earned: their variable whole life insurance policy's face amount will increase if the investment experience has been good. If the investment experience is not favorable, the face amount will decrease but it cannot get below the original face amount.
Another important characteristic of variable whole life insurance policies is that cash surrender values are not guaranteed, but just like death benefits, they depend on the investment experience. The cash value, too, can vary according to the investment performance of the cash value account. There is some investment risk involved here, for if the cash value declines, the policyholder lose part of their principal and will have to make up for the loss by putting extra money towards the increased premium.

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