Variable Premium Life Insurance

Published: | Updated: January 5, 2018

Definition - 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

How Well Do You Know Your Life Insurance?

The more you know about life insurance, the better prepared you are to find the best coverage for you.

Whether you're just starting to look into life insurance coverage or you've carried a policy for years, there's always something to learn.

Share this:

Connect with us

Email Newsletter

Join thousands receiving the latest content and insights on the insurance industry.