Variable life insurance.

In plain English

Variable life insurance is a type of permanent life insurance where the cash value is invested in subaccounts that work much like mutual funds, holding stocks and bonds. Because the money is in the market, the cash value (and sometimes the death benefit) can rise when investments do well and fall when they do poorly. You choose how the cash value is invested and you carry the investment risk, not the insurer. Because it is an investment product, it is regulated as a security and sold with a prospectus by licensed agents.

01Why it matters

Your cash value can grow faster than a fixed policy, but it can also shrink in a downturn, and the layered insurance and investment fees can quietly drag down returns over decades.

02The math, step by step

Suppose you put your variable life cash value into stock subaccounts. In a strong market year the cash value climbs, but in a down year it falls, and either way the policy charges insurance costs plus investment fees on top. Over 30 years, those stacked fees can cost you a meaningful share of your growth compared with investing the same money in a low-cost fund outside the policy. The specific subaccount fees and fund expense ratios are set by your contract, so check the subaccount and fund fees in your own policy prospectus.

03What this is NOT

04Receipts

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