Is more choice always better when it comes to variable life and variable annuity sub-accounts?

More choice isn't always better, according to many consumers. Life insurance companies seem to think that more choice is better when it comes to your investment choices on variable life insurance policies and variable annuities, as well.

Many life insurers have increased the number of sub-accounts available with their variable products since the roar of the stock market in the mid-90's. A series of investment choices are similar to mutual funds are pretty much what sub-accounts are.

Aggressive growth funds that might produce either shrunken or robust returns are usually the results of sub-accounts, even though many insurers are offering more options to expand their investment offerings.

Sub-account investments should be chosen by policyholders with extreme caution because a healthy sum of cash value in a variable or variable universal life insurance policy is needed to pay the costs of keeping the policy in force.

Keep in mind that you allocate your premium payments to a separate account which is made up of variable sub-accounts when you purchase a variable universal life insurance policy. Your allocated premiums will then be invested by sub-accounts in underlying portfolios which will be comprised of stocks, money market instruments or bonds.

Based on the investment performance of these portfolios, your cash value will fluctuate. In order to pay the policy's monthly charges, which will probably include a charge for the cost of insurance; your insurance company will debit your cash value. As long as the cash value of the policy is sufficient to pay for the monthly charges, your policy will remain in force.

Keep in mind that there should always be enough money remaining in the cash value to pay for monthly insurance expenses. Many consumers don't know that and withdraw too much from the cash value, not leaving enough to pay the monthly expenses.

Your insurer will send you a letter asking you to pay more in premiums when the money runs too low in your cash value. If you take too much money, and then refuse to pay more in premiums, your policy will lapse. It is highly crucial to know that the performance of your sub-accounts is necessary to keeping your policy in force.

According to Morningstar, and investment tracking and ratings firm based in Chicago, thousands of sub-accounts have been introduced for variable annuities, variable universal life and variable life.

Many major life insurance companies have already upgraded their sub-accounts options for the benefit of their consumers. William Goslee, vice president of investment management at Nationwide, claims that the company has added more sub-accounts in order to provide customers with a "wide array" of fund choices. He says that the demands of investors are trying to be met by many insurers.