What Does Variable Premium Life Insurance Mean?
A variable premium life insurance policy refers to a non-participating whole life insurance policy. These kind of policies usually specify two premium rates, a maximum guaranteed premium rate and a lower premium rate.
Many people also refer to variable premium life insurance as non-guaranteed premium life insurance, flexible premium life insurance or indeterminate premium life insurance.
Insuranceopedia Explains Variable Premium Life Insurance
When an individual purchases this policy, the insurance company charges the lower premium rate. In addition, the insurer also guarantees that the policyholder will pay the lower premium rate for a predetermined duration of time, usually a period from of one to10 years. Once this duration lapses or concludes, the policyholder will need to pay the revised premium communicated by the insurer.
It is worth noting that insurers could adjust this premium as frequently as on an annual basis. In addition, the revised premium could be higher or lower than the previous premium rate. However, this revised premium will usually never exceed the maximum premium rate established by the insurer at the time of purchasing the policy. Typically, insurers calculate the revised premium by accounting for the actual mortality, interest and expenses experienced.
The benefits of purchasing this policy include:
- Premiums are usually lower than those for other whole life insurance policies
- Budgeting life insurance premiums is easier because the premiums only change annually will never exceed the maximum premium rate
- The possibility of having to pay even lower premiums if the insurer's expenses decrease