19.10 Flexible Life Products
We've already discussed these products, but let's review here.
Variable Life Insurance
The face value of whole life insurance stays the same throughout the life of the policy, which lessens purchasing power. Variable life was developed in an attempt to keep in step with inflation due to the underlying investments. The original theory was that the stock market would keep up with inflation and therefore so would the variable's benefits; however, though it has helped, it has not provided a complete hedge against inflation. As the variable's value fluctuates, it comes under regulation by the SEC as well as the state Office of Insurance Regulation. Agents must be licensed in both life and variable annuities to market this product.
Universal Life Insurance
These policies are very flexible. The policyowner can adjust the premium amounts to be paid and when they will be paid, as well as change the face amount periodically, though they typically have a fixed maturity date. The policy's accumulated cash value is tax sheltered, yet is available to the policyowner on a partial withdrawal system. A specific percentage of all premiums must be used to purchase death benefits or the policy will lose the favorable tax treatment of its cash value.
