20-Plus Years of Investment in Variable Life - Part 4

The amount of life insurance in fixed-premium variable life is fixed at its minimum level upon the date of purchase. The face amount varies thereafter only as a result of positive and negative investment account results above the initial face amount. This policy offers a unique advantage in that even if investment results are disastrously poor, you will never be called upon to pay a larger premium than contracted for originally, nor can the face amount of your policy decrease below that at which you originally purchased it. This is unique to fixed-premium variable life.

While variable life policies have had positive investment results right from the start, the product, until recently, has been slow to catch on with the insurance companies, the public, the life insurance sales force, attorneys, accountants, bankers, and the financial planning and investment communities. Of the more than 1000 life insurance companies actively selling life insurance in the United States, only about 70 can be considered to be in the business of selling variable life insurance.

Life insurance agents have been known to drag their feet when considering variable life because of their relatively conservative backgrounds and training, as well as the additional licensing and education required for selling this product. Investment advisors have been reluctant to recommend it, in spite of its long history of credible results, because many planners have their minds so set against mixing insurance and investments that they have not stopped to study it.

Surprisingly, lawyers, accountants, and bankers have resisted the use of variable life in helping their clients plan their estates. It is surprising because a tenet of their profession, the Prudent Investor Act, requires diversification, and no other type of life insurance contract allows diversification. The planning community will have to become more aware as more clients ask about it. You personally may have to encourage the planners to do so.

Variable life does require a level premium that is substantially higher than that required by a yearly renewable and convertible term insurance policy, and so the decision to invest that additional capital is an important one. Just as you inquire about expenses, management fees, and other factors when you decide to make an investment within a mutual fund, you will need to make similar inquiries when you are about to invest in variable life.