Variable life insurance is yet another choice that consumers have when looking to purchase insurance for themselves or a family member. The variable life insurance policy is a form of whole life insurance that provides a set death benefit. It is called variable because of the way that the money is used to fund the policy.

The money is allowed to be invested in multiple options. These options could be money market funds, bond funds, equity funds or they could be invested in a combination of the three. The thing to be aware of is that since they are tied to the stock exchanges, the value of the investment will vary and go up and down because of mirroring the market. So the true value of this type of life insurance policy is determined by adding up the value of the un-invested portion of the money paid into the policy. In addition to this, you add the invested portion as well. This will give you the true total of the value of the policy.

Since the value can fluctuate, variable life insurance policies establish a floor below which the value of the policy can never drop. Before you get happy, realize that this value only refers to the actual death benefit and does not refer to the cash value of the policy.

 The variable life policy allows the consumer to invest their untaxed money into various funds. The money grows, tax free, until the policy is redeemed. The added benefit is that any extra profit earned by the money in the funds can be used by the policy holder to lower insurance premiums in the future.

Given that the stock market is not guaranteed to go up every year, this life insurance policy option carries a significant risk. If you invest in the wrong funds, you can literally make your policy basically worthless outside of the death benefit. Variable life insurance companies will make sure the death benefit is guaranteed, but when the funds are invested into a stock market vehicle that goes down in value and becomes worthless, the actual death benefit (even though its guaranteed) will be reduced.

 The variable life insurance policy can be an investment vehicle that can help you greatly, but it also has the potential to cost you a great deal. As with any investment product, you need to do your research before you buy one of these policies.