While at lunch with a group of coworkers, one of your friends mentions that he plans to buy a variable life insurance policy because it provides a good annual return and is a good way to build savings for his five-year-old's college education. another colleague says that she's adding coverage through the group plan's additional insurance option. what advice would you give them?

There is no guarantee on variable life insurance policies hence it does not give estimated level of savings. The expenses related to variable life insurance policies are much higher as well as the annual fees which in turn reduces the total returns so person should decide keeping in mind these expenses. If the person likes to borrow against the cash value related to the policy with any reason for example, for his child’s college education, in case of no payment of loan, income taxes must be paid on the total amount of loan and the penalties thereon.

In case, insured person does with an outstanding loan, that amount will be subtracted from the amount that the beneficiary will receive. In contrast, if she buys additional term insurance through a group plan, the insured person will require comparing the premiums with groups plan with other plans that other insurance companies are providing so as to find out the most cost effective coverage.

Term insurance does not provide cash value build up and hence taking a loan on this policy is not suggested. Generally, we can say that with increasing age, the term insurance becomes costly and expensive. So if she thinks that there is a need for insurance in the future, she should opt for a good whole life or variable life policy that will build up cash value.

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