Term Vs. Variable Life Insurance

Term and variable life insurance are two different types of life insurance policies that provide different benefits to consumers. Term life insurance policies provide a death benefit for a certain number of years, while variable life insurance policies provide benefits for the life of the policy holder.

Term Life Insurance

• Term life insurance is one of the most common types of life insurance available in the market. This type of insurance is often the least expensive option available because it does not accumulate in cash value -- you are simply giving the insurance company a certain amount of premium money, and you get a death benefit in return. The benefit of this type of policy is that you can get a large death benefit for a relatively small amount of money.

Variable Life Insurance

• Variable life insurance is a type of permanent coverage that is similar to whole life insurance. Variable life insurance also provides you with a death benefit. With this type of coverage, a portion of your money goes into an investment account. You can choose several different types of investments to put your money into. For example, you may choose to put your money into a certain mutual fund. This can increase your cash value and your death benefit.

Premiums

• One of the differences between these two types of insurance is the way that your premiums are handled. With term life insurance, you will typically have a specific premium amount that must be paid; you could pay this every month or every six months. With variable life insurance, your premium can fluctuate depending on how well your investments do. If you do not feel like making a premium payment, you could use some of the investment returns to pay for it.

Investment

• With these two types of policies, you can handle your investments differently. Some investors like to purchase a term life insurance policy and invest the difference between the prices of the policies. This way, you have complete control over what you do with the money and there are no restrictions. With a variable life insurance policy, you have to choose from the options that are available from the insurance company. You also cannot access the money without taking out a policy loan or surrendering the policy.

Forced Investing

• Some people prefer to get a variable life insurance policy because it influences them to invest. While the idea of buying variable insurance and investing the difference may be sound, many people do not actually put it into place. They end up using the money for something else. With a term policy, part of your premium goes to investing. You will have a bigger premium payment to pay, but you know that you are investing every time you make it.