Variable Premium Life Insurance
What Does Variable Premium Life Insurance Mean?
A variable premium life insurance policy is a non-participating whole life insurance policy that typically includes two specified premium rates: a maximum guaranteed premium rate and a lower premium rate.
This type of policy is also commonly referred to 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 a variable premium life insurance policy, the insurer initially charges the lower premium rate and guarantees this rate for a predetermined period, typically ranging from one to ten years. After this period ends, the policyholder must pay the revised premium as communicated by the insurer.
Insurers may adjust premiums as often as annually, and the revised premium could be higher or lower than the previous rate. However, it will never exceed the maximum premium rate set at the time of purchase. The revised premium is calculated based on actual mortality rates, interest earnings, and expenses incurred by the insurer.
Benefits of Variable Premium Life Insurance:
- Lower Initial Premiums: Premiums are generally lower than those for other whole life insurance policies.
- Simplified Budgeting: Premiums change only annually and will never exceed the maximum premium rate, making budgeting more predictable.
- Potential for Reduced Premiums: Policyholders might pay even lower premiums if the insurer’s expenses decrease.
