Variable life insurance policy is also sometimes called variable appreciable life insurance. Your beneficiary will receive permanent protection with this type of whole life insurance. The money used to fund this policy is gained in a somewhat unique way and this is why it is called a "variable" life policy. A percentage of your monthly premiums will be set aside for investment. The investment possibilities are through bonds, stocks, and/or equity funds.

As with any other investment of these type, your total policy value will fluctuate as the market fluctuates. You can choose to invest some or all of the money you put into this investment account portion, but in the end your total cash value will be a combination of the sum of money you didn’t invest and the amount your invested portion is worth at any given time.

You’ll usually be able to arrange for a hold on the value of your variable life policy if you want to set up a safeguard. What the hold does is to make sure that the value of your policy won’t fall below the amount you set in the beginning. This hold, however, only applies to the death benefit you set up and will not affect the cash value account. The cash value account can be used during your lifetime and the cash that is available for use will depend on your investments in it.

Pros of a Variable Life Insurance Policy

One of the best things about a variable life insurance policy is that the money you use for investment in the policy is untaxed and they will remain so until the policy is cashed out at the end by your beneficiary. You could get to a point with your investments that the money earned can actually lower your premiums or pay them outright each month. This means that the policy has the potential to become self-sustaining.

The Cons of a Variable Life Policy

A variable life insurance policy will present you with the risk of having no cash value account at the end. This is the same as any other investment strategy so you will need to be prepared that all that might be left at the end will be the death benefit minus any fees and losses from the cash value account that need to be covered. You may be offered a guaranteed death benefit but be aware that this benefit will probably be significantly lower than the initial amount you were quoted.

While a variable life policy has amazing potential to make a lot of money before it needs to be cashed out you need to be sure of your investing skills. You don’t want your beneficiary to be left with nothing or little to nothing because of poor investment choices.