Legal Protections for Variable Life Insurance Policyholders

Unlike the traditional whole life policy, in the variable contract insurers do not guarantee minimum cash values. The cash value at any point in time is based on the market value of the assets in the separate account the policyowner has chosen. VL policyowners bear all the investment risk associated with policy. So cash values can grow well beyond the assumed rate or not at all. There can even be negative growth. That is to say that it is possible in a variable life contract for the policyowner to lose the entire amount in the selected portfolio.

Otherwise, the insurer provides the VL policyowner with most of the usual features of traditional level premium life insurance including guaranteed maximum mortality charges, nonforfeiture values, a reinstatement period, and settlement options.

Options or riders available under VL contracts include waiver of premium, guaranteed purchase or insurability, accidental death benefits, and disability income, as well as others commonly available with other types of policies.

Reproduced with permission.  Copyright The National Underwriter Co. Division of ALM

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