Chicago Swans

It’s not just your portfolio that will feel the pinch because of the recent stock market crash. Your variable life insurance policy may also be in danger of taking a downward spiral. Variable life insurance policies have been on the rise – currently accounting for up to 40 percent of life insurance premiums. Michael Kortz, RFC, RR Insurance Agent from Orange County, California notes, “This type of policy has become increasingly popular because of the substantial tax advantages and larger cash value gains. However a variable life insurance policy exposes you to a higher risk because your policy’s value is directly tied to the investments you make.”How a Variable Life Insurance Policy WorksVariable life insurance builds cash value over time. The cash value of the policy is invested in a variety of different accounts, similar to those found in a 401(k). The mix of investments is completely at the discretion employment laws uk of the policy holder. What differentiates this policy from a more traditional option is the dramatic fluctuation of a policy’s cash value. Stock market gains can result in a rise in cash value which can lead to a cash rich policy. However, large market losses could result in negative consequences.Polices in Danger of CollapsingMany variable life insurance policies have been minimally funded in hopes that stock market gains will help fund their policy. A large amount of policies were sold with the assumption that the stock market would consistently provide big returns. But with the recent stock market plummet these policies face serious risk. Cash Value Decrease in PolicyBecause variable life insurance is directly tied to stock market performance your policy’s cash value may experience a decrease. Depending on which subaccounts have been selected, a policy could experience a 30-50% decline in policy value.