Variable life is one kind of permanent insurance that lets you target your premium to one or more separate investment funds. These could be fixed income investments, or stocks, bonds, or a money market fund. Depending on company policy, you can switch your investments two to five times per year. Unlike universal life, with variable life you can control the investment of your cash value.

The policy could be risky because the investment could go up or down. The cash value and investment will vary, depending on what your investment fund does. The death benefit cannot fall below the amount of insurance you first bought. As with traditional whole life, you pay fixed premiums and can borrow against the policy at fixed or variable rates.

Because you decide where your money is invested and take the risk, variable life is considered a security. Insurers must, by law, sell variable life by prospectus. A prospectus is a document that gives you important facts about the company and the policy. Variable life often costs more than other types of cash value life insurance. Under current law the cash value of variable life, like those of universal life and whole life, will not be taxed until you cash in your policy.