How Does A Flexible Premium Adjustable Life Insurance Policy Work? 
A flexible premium life insurance policy is a cash value policy which allows the policy holder to pay flexible premiums in lieu of one set premium . The policy is made up of annual renewable term insurance bundled with a cash accumulation account usually touting high accumulations of cash many years in the future . This is what entices many to purchase this type of policy but buyer beware ! In this policy the cost of the insurance increases annually and when the cost of the insurance passes the premium that is being paid the cash values begin subsidizing the increased cost of coverage . If premiums are not increased the policy will collapse sometime in the future . To keep this from happening the policy holder must pay a target premium which is usually much higher than the quoted premium when the policy was issued . Again , the policy holder is paying more than he needs to be paying for the coverage . A better alternative to this is purchasing a level term policy and investing the savings outside the policy in an IRA . This is called split-funding and will give the policy holder control of his cash values . 