Variflex review

It depends. As a pure accumulation VA without a living benefit, Variflex sits in a peer group that is increasingly hard to justify against indexed alternatives and against simply investing in a taxable account. It is a reasonable contract if you specifically want the stepped-up death benefit and the fixed account inside a tax-deferred wrapper, and you are comfortable with the 8-year surrender. It is not a strong fit if your goal is income, principal protection, or low all-in cost.

The rational reason to choose Variflex is the combination of tax-deferred subaccount investing, a stepped-up death benefit that locks in the highest contract value every six years through age 75, and a $25 minimum that makes it usable for small or systematic contributions. The Hospital/Nursing Care and Terminal Illness waivers add real-world flexibility for buyers who might face a health event during the surrender period. The fixed account at 3.25% gives a place to park money without subaccount risk.

I think Variflex is best for advisor-channel buyers in their 50s and 60s who already have a Security Benefit relationship, want tax-deferred growth on long-horizon money, and value the stepped-up death benefit as a legacy hedge. It also fits buyers issuing the contract at younger ages who want to maximize the six-year step-up window. It is a poor fit for anyone whose top priority is guaranteed lifetime income, anyone unwilling to commit to an 8-year surrender period, and anyone who is already maxing out tax-advantaged accounts and does not need the extra deferral.

You are buying a tax-deferred wrapper around a menu of 37 subaccounts and a fixed account, plus a death benefit that may step up over time. You are not buying lifetime income, you are not buying principal protection inside the variable subaccounts, and you are not buying market-linked crediting with a floor. The subaccount value moves with the underlying funds, and the only structural protection here is the death benefit and the fixed account. The product makes the most sense when the death benefit is part of the reason you are buying, not just a feature you tolerate.

The core of Variflex is the subaccount lineup. There are 37 variable subaccounts available, with net expense ratios spanning a wide range from 0.61% to 2.44%. Buyers allocate among them and a single fixed account currently crediting 3.25%. Contract value rises or falls with the subaccount performance, less the 1.20% mortality and expense charge applied at the contract level. There is no cap, no participation rate, no buffer, and no floor on the subaccounts. The fixed account is the only place inside the contract where return is guaranteed.

Because the subaccount expense ratios vary so widely, fund selection matters more than usual. A buyer who picks low-cost index-style subaccounts will be paying somewhere around 1.81% all-in (the 1.20% M&E plus a roughly 0.61% subaccount). A buyer who picks specialty or actively managed subaccounts at 2.44% will be paying more than 3.6% before any rider or administration fees.

The stepped-up death benefit is the most meaningful secondary feature. For owners issued at ages 0-75, the death benefit equals the greater of total purchase payments less withdrawals, the current contract value, or a stepped-up value that locks in the highest contract value reached every six years through age 75 (plus subsequent payments minus withdrawals). That step-up can become valuable in a long bull market because it ratchets the floor higher every six years and then carries forward.

For buyers who view the VA partly as a legacy vehicle for non-qualified money, this feature does real work. For buyers who do not care about the death benefit, the feature is mostly invisible value they are still paying for through the 1.20% M&E.

Free withdrawals of 10% of contract value are available after the first contract year, with a minimum $2,000 balance required to remain. Withdrawals above that during the 8-year schedule trigger declining surrender charges from 8% in year 1 down to 0% in year 9.

Two waivers extend liquidity in real-world situations. A Hospital/Nursing Care waiver is available outside California and Washington, and a Terminal Illness waiver is available outside California and New Jersey. Systematic withdrawals on amounts above $40,000 can begin immediately, while smaller systematic withdrawals start after the first contract year. There is no MVA on Variflex, which simplifies the surrender math compared to many fixed-indexed or RILA products. Even so, this is not a contract to treat as short-term cash. Pulling more than the 10% free amount in years 1-3 is genuinely expensive.

The headline fee is the 1.20% base contract charge, sometimes called the mortality and expense risk charge. That is in line with traditional B-share VAs but high relative to modern advisory-channel I-shares and to indexed alternatives that carry no explicit M&E. A $30 annual administration fee applies, although it is waived once contract value exceeds $25,000 or the contract has been in force eight years or more.

Subaccount expense ratios are where the all-in cost varies most. At the low end, 0.61% lands the buyer near a 1.81% total annual cost before administration; at the high end, 2.44% pushes the total annual drag past 3.6% before any other fees. There is no rider fee because there is no living benefit rider available. The tradeoff to internalize is that the 1.20% M&E is buying tax deferral plus the death benefit plus the waivers. If those features are not doing meaningful work for the buyer, the cost is hard to justify against a taxable brokerage account.

Legal Entity: Security Benefit Life Insurance Company

Parent: Eldridge Industries

A.M. Best Rating: A-