A Guide to Variable Insurance Products

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

When planning for financial security, understanding all your options is crucial. This guide covers variable insurance products such as variable annuities, registered index-linked annuities (RILAs), indexed annuities, variable life insurance, and indexed universal life insurance. These products offer growth opportunities and stability, playing a vital role in financial planning.

Variable Annuity Products

Types Of Variable Annuities

Variable Annuities

Variable annuities allow you to invest in various funds with the potential for growth based on their performance. This type of annuity is suitable for those looking to potentially increase their retirement savings through market participation.

Registered Index-Linked Annuities (RILAs)

RILAs provide the opportunity for market gains while offering some protection against significant losses. They are ideal for individuals seeking equity market exposure without fully absorbing the downturn risks.

Indexed Annuities

Indexed annuities offer a balance by providing a minimum guaranteed return and capping potential gains. They are less risky than direct investments in stocks and are favored by those seeking steady, albeit limited, growth.

Comparing Variable Annuity Products

  • Risk Exposure: Variable annuities carry higher risk due to direct market involvement, whereas indexed annuities offer lower risk with guaranteed returns.
  • Growth Potential: RILAs and variable annuities often offer higher growth potential compared to indexed annuities, which have capped gains.
  • Investment Control: Variable annuities provide more control over investment choices, while RILAs and indexed annuities are linked to specific market indexes with predefined caps and floors.
FeatureVariable AnnuitiesRegistered Index-Linked Annuities (RILAs)Indexed Annuities
Direct Market InvestmentYesNoNo
Investment ControlHighModerateLow
Risk LevelHighModerate with some protectionLower with minimum guarantees
Return PotentialHighestHigh with capsModerate with caps and floors
Protection Against LossNoneYes, up to a certain limitYes, always provides a minimum return
Growth CapNoneYesYes

This chart emphasizes the direct market investment and high control associated with variable annuities, compared to the moderated risk and capped gains in RILAs and indexed annuities. It also shows the unique minimum return guarantee provided by indexed annuities.

Comparing Variable Annuities

Variable Life Insurance Products

Variable Life Insurance

Variable life insurance combines life coverage with an investment component, allowing the cash value to grow or decrease based on market performance. This is suitable for those interested in potential investment growth along with insurance coverage.

Variable Universal Life Insurance (VUL)

Variable universal life insurance (VUL) combines the features of universal life and variable life insurance, offering flexibility and investment options. You can adjust the premiums, death benefit, and savings component. The policy’s cash value is invested in various accounts similar to mutual funds, and the performance of these investments will affect the cash value and the amount of the death benefit.

Indexed Universal Life Insurance

Indexed universal life insurance also links the cash value to the performance of a market index but with certain protections against loss. It offers flexibility in premiums and benefits, making it ideal for those seeking adaptable life coverage with a conservative growth approach.

Comparing Variable Life Insurance Products

  • Flexibility: Variable life insurance offers more investment options, whereas indexed universal life insurance provides more flexibility in premiums and death benefits. Variable universal life insurance provides the flexibility of IUL with more investment options.
  • Risk Management: Both types provide a death benefit, but variable life and variable universal life insurance have higher risk and potential reward due to direct market investments, unlike indexed universal life, which offers protective measures against market downturns.
  • Potential for Returns: Variable life policies and variable universal insurance typically offer higher potential returns based on riskier market investments. Variable universal insurance offers the added benefit of adjusting premiums and death benefits to potentially improve financial outcomes. Indexed universal life policies focus on more stable, predictable growth due to protective measures.
FeatureVariable Life InsuranceVariable Universal Life InsuranceIndexed Universal Life Insurance
Premium FlexibilityFixedFlexibleFlexible
Investment OptionsMany optionsMany optionsLimited to specific indexes
Risk LevelHighHighLower, with protective features
Cash Value GrowthBased on market performanceBased on market performanceTied to a stock index, with caps and floors
Death Benefit FlexibilityLimitedAdjustableAdjustable
SuitabilityFor those seeking investment opportunities with insuranceFor those seeking high flexibility in premiums and death benefitsFor those seeking stable growth with less risk
Types Of Variable Life Insurance

Choosing the Right Product

Selecting the appropriate variable insurance product requires considering your financial goals, risk tolerance, and the specifics of each product. Understand the unique features, benefits, and risks to make an informed decision that aligns with your financial strategy.

Need Personalized Advice?

Choosing the right variable insurance product can be challenging. If you’re looking for clear guidance or a tailored recommendation based on your specific needs, contact us today for free advice or a personalized quote. We are here to help you secure and enhance your financial future with the right choices.

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Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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