How do fixed life insurance policies differ from variable life insurance policies?

Fixed life insurance policies are characterized by their stable premiums and guaranteed payouts, providing a level of predictability and security for the policyholder. This means that the premiums remain constant over time, and the death benefit promised by the policy is clearly defined and assured. Such policies are designed to offer financial protection without the complexity of investment components.

On the other hand, variable life insurance policies incorporate an investment aspect, allowing policyholders to allocate a portion of their premium payments into various investment options, such as stocks or bonds. The death benefits and cash values of these policies can fluctuate based on the performance of the chosen investments, offering the potential for higher returns but also introducing a degree of risk.

Understanding these core differences is essential for consumers evaluating their life insurance needs. Fixed policies are suitable for individuals who prefer stability and guarantees, while variable policies may appeal to those who want the opportunity to grow their cash value through investments.