How Variable Life Insurance Helps You Protect and Grow Your Money

Insurance can feel confusing, as there are so many options out there. You need to have the right help and guidance to understand what works best. Among different types of life insurance, one of the most flexible options is variable life insurance. It provides both protection and investment. You are provided with life cover and a chance to grow your wealth through market-linked investments. Let’s understand what it means and how it will work before you decide if it is this is what you need. 

What Is Variable Life Insurance?

A variable life insurance is very simple to understand. It is a policy that will give you life cover and will also let you invest your premiums in funds like equity, bonds or balanced options. The policy’s value will change based on how these investments perform. 

Key aspects:

• This combines life insurance with investment options
• The policy value depends on market performance
• You need to choose where to invest your premium
• This will offer both protection and growth potential 

How Variable Life Insurance Works

A variable life insurance plan divides your premium into two parts. Which is one part that goes towards life cover, and the other is invested in your chosen funds. The returns will vary based on the market movement, which means your policy value will rise or may fall over time. 

Step-by-step process:

• You buy a policy and choose your premium amount.
• A part of the premium covers your life insurance.
• The rest goes into investment funds of your choice.
• Your fund value changes with market performance.
• You receive the policy’s cash value or death benefit.

Example: If you invest in equity funds and the market grows, your returns will likely be higher. If the market drops, your returns might fall too.

Key Features and Benefits of Variable Life Insurance

A variable life insurance plan offers flexibility and potential growth while protecting your family’s future. It lets you take control of how your money is invested while ensuring life cover stays active throughout the policy term.

The key benefits include:

• Dual advantage: You get both life insurance coverage and the opportunity to invest. This means your family stays financially protected, and your investments continue to grow over time.
• Fund flexibility: You can switch between different fund types, such as equity or debt, depending on market conditions. This allows you to manage risk and aim for better returns.
• Cash value growth: The policy builds a cash value that grows with your chosen fund’s performance. You can use this value later for future financial goals or as a source of liquidity.
• Death benefit: If something happens to you, your family receives a lump sum payout. This helps them stay financially stable and continue important expenses like education or household needs.
• Loan facility: You can borrow against your policy when you need extra funds. It helps during emergencies without the need to surrender your policy.
• Customisation: Choose how often you pay premiums and where your money is invested. This flexibility ensures your plan suits your budget and financial goals.
• Transparency: You can easily track your policy’s performance and fund value online. This keeps you informed about how your investments are growing and where your money goes.

What Should I Do Before I Opt for A Variable Life Insurance Policy?

Before you buy a variable life insurance plan, you need to make sure it suits your goals and budget. Here are some pre-investment checks:

1. Review your financial goals.
2. Assess your risk tolerance.
3. Compare policy options and charges.
4. Check the insurer’s fund performance.
5. Read all terms and conditions. 

What are the Investment Options in Variable Life Insurance?

A variable life insurance definition includes multiple fund choices based on your risk level. You can mix funds to balance safety and growth. Some of the investment options include:

• Equity Funds: These funds invest mainly in company stocks, offering high growth potential over the long term. They suit investors who are comfortable with short-term market ups and downs in exchange for higher returns.
• Bond Funds: These focus on government or corporate bonds, providing steady and predictable returns. They are ideal for those who prefer lower risk and a consistent income.
• Balanced Funds: These combine both equity and debt investments to balance growth and stability. They offer moderate returns while reducing the overall impact of market fluctuations.
• Money Market Funds: These invest in short-term instruments like treasury bills or deposits. They carry low risk and provide quick access to your money with modest but steady returns.
• Index Funds: These follow major market indices like Nifty or Sensex. They offer diversified exposure and long-term stability by matching the overall market’s performance.

How to Choose the Right Variable Life Insurance Policy?

Selecting the right variable life insurance plan involves simple but thoughtful steps.

1. Define your goals such as saving for family security or future expenses.
2. Check your budget and premium affordability.
3. Compare fund performance and flexibility options.
4. Review policy charges and surrender terms.
5. Read customer reviews and insurer reliability.
6. Choose a plan that fits both investment and protection needs.

What are the Risks Associated with Variable Life Insurance?

Every investment has risks, and variable life insurance is no exception. Since the value depends on market performance, it can fluctuate over time.

Here are some of the common risks:

• Market risk: Since your policy’s value is linked to market performance, any fall in the market can reduce your returns. This makes it important to stay invested for the long term to balance out short-term ups and downs.
• Cost risk: Management and policy charges are deducted regularly from your investment. If these costs are high, they can lower your overall returns and affect the growth of your policy value.
• Policy lapse: If you miss paying your premiums on time, your policy might lapse. This can result in losing both your life cover and the benefits you’ve built over time.
• Liquidity risk:  Withdrawing your investment too early can lead to penalties or reduced benefits. It’s better to plan your withdrawals carefully to avoid losing potential returns.

Variable Life Insurance Fees and Expenses

Every variable life insurance plan comes with certain fees and expenses that affect your overall returns.

Understanding these costs helps you make better investment decisions and manage your policy wisely. Here are the common charges involved in a variable life insurance policy:
 

Exchanging One Variable Life Insurance Policy For Another

You might think of switching your variable life insurance plan if another policy offers better terms or fund performance. But before making the move, evaluate the impact on your returns and benefits.

Example: If your current policy has lower charges and steady fund growth, switching may not be ideal. But if the new plan offers more flexibility and better returns, it might help you achieve your goals.

Things to consider:

• Check surrender charges and tax impact.
• Compare fund performance.
• Review the new policy’s features and costs.
• Consult your advisor before switching.

Building Value Through Variable Life Insurance

Understanding variable life insurance is easier when explained in simple terms. It is a mix of protection and investment that gives you both security and growth. We at Shri Ram Life Insurance believe in walking beside you as you plan your future. With the right awareness and clarity, you can choose a plan that fits your lifestyle, goals, and comfort level. When you make informed choices, your insurance becomes more than a policy. It becomes a lifelong companion that helps you stay secure and confident.

Conclusion

A variable life insurance plan may be a good option if you wish for protection as well as growth. But it's only one of the several options you can opt for according to your requirements. If your primary intention is to achieve pure life cover, a term insurance plan can provide straightforward and cost-effective protection. If you prefer to concentrate more on long-term creation of wealth, a ULIP plan would be more appropriate with its market-linked advantages. If you are future-planning, a retirement plan provides for a fixed income in your golden years, whereas a savings plan enables you to create a financial safety net for achieving life's valuable milestones.

Selecting the appropriate plan is based on your priorities, be it security, growth, or planning for the future. Whatever your objective, Shriram Life Insurance is available to assist you in getting the plan that suits your path.