It is a type of permanent life insurance. Like other permanent policies it also builds up cash value in the policy along with death benefits, but with a difference. If you choose this package then you can use the cash value and invest it in separate accounts such as bond and stocks. It is entirely on the policy holder's choice of what sort of investment he can do. The universal written with it means that you have premium payment flexibility as well which is a feature of universal life insurance. Premiums payment can be a maximum according to IRS rules and can be a minimum according to the policy holder's choices.

Benefits of Variable policies

Variable life insurance has several benefits. You can get tax advantage on the cash value that is built in the policy and you can also take the money from the account and invest it to make even more cash value. The investments earned are no charged with income tax if the policy is current. The returns are a great way of repaying the cost of insurance without utilizing the cash value. The reason to increase the cash value is that the net insurance you purchase is equal to the death benefit minus the cash value of the policy. If you invest and earn profits you can increase the cash value considerably and more the cash value lesser will be the amount of insurance you will have to buy which means lesser premium.

Investment Risks

Variable life insurance feature of investing the cash value and tax free returns is very appealing but it is a high risk too. What if the experience is not god and you lost money in purchasing stocks. In this case the cost of Insurance will start depleting your account and in some time your policy may cease. If you choose variable insurance sign the policy with an insurer that gives a guaranteed death benefit for a certain time period if you make proper premium payments.

Premium Flexibility

The premium is flexible and the consumer can choose how much to pay each time a payment becomes due. Although there is no restriction in that but there are limits beyond which the payment cannot increase or decrease. To get a guaranteed death benefit you will still have to pay a certain minimum set buy the insurer. In case there is a lot of cash value in the account with which the cost of insurance can be paid the premium payments can be totally skipped. The maximum payment however is regulated by IRS life insurance code. For a given death benefit in a life insurance policy it is already laid down in section 7701 that what will be the maximum amount f premium that can be taken by the insurer. The effective policies have a maximum allowed premium to be paid and very less impact of cost of insurance on the cash value. The guidelines of IRS protect not only the consumer but also the insurer in terms of huge investment return that is tax deductible.