Variflex LS review

It depends. If the goal is tax deferral on subaccount investing inside an insurance wrapper with no lockup, Variflex LS is a serviceable answer — especially for buyers who would actually use the stepped-up death benefit. If the goal is guaranteed lifetime income or principal protection, this is not the right product, because there is no living benefit and subaccount values move with the market.

The rational case is straightforward. A C-share VA gives you full liquidity from day one, which most variable annuities and most indexed annuities will not. Add tax-deferred compounding, a stepped-up death benefit that locks in highest contract values on a six-year cadence through age 75, and 44 fund choices including a 4.00% fixed bucket, and you have a flexible accumulation vehicle for someone who wants insurance-company features without surrender lockup.

I think Variflex LS fits best for nonqualified, longer-horizon investors who have already filled tax-advantaged accounts, who want subaccount-style investing inside a tax-deferred wrapper, and who actively value the stepped-up death benefit for estate planning. Buyers focused on lifetime income, principal protection, or low all-in cost should look elsewhere — at an income FIA, a fixed annuity, or a no-load investment-only VA respectively.

You are buying a tax-deferred insurance wrapper around mutual-fund-like subaccounts. The "variable" in variable annuity means the account value rises and falls with the funds you choose; there is no cap, floor, buffer, or guarantee on the investment side. What the insurance company sells you is the wrapper itself — tax deferral on gains until withdrawal, a death-benefit guarantee, and access to the fixed account — in exchange for the 1.40% annual contract charge.

Variflex LS offers 44 variable subaccounts plus a fixed account currently crediting 4.00%. You allocate premium across those choices, and the contract value moves with subaccount performance plus any fixed-account interest. The contract allows up to 14 free transfers per year between options, so reallocating is operationally easy. The 1.25% base contract charge plus the 0.15% administration charge — 1.40% total — is deducted at the contract level on top of whatever each underlying subaccount charges in fund expenses. That layered fee structure is the central trade.

The stepped-up death benefit is the other thing this contract is doing. It guarantees the beneficiary the greater of full account value, premiums paid less withdrawals, or the highest fifth-anniversary value until age 75 — and it locks in the highest contract value every six years through age 75. For an investor whose primary fear is dying in a down market and leaving heirs less than what was originally contributed, that ratchet has real value. For an investor whose heirs will inherit the account intact regardless, it is paying for protection that may never trigger.

There is no surrender schedule. As a C-share, Variflex LS imposes no withdrawal charges, no market value adjustment, and no minimum holding period before withdrawals are penalty-free at the contract level. That is the defining structural feature. Tax treatment is separate — withdrawals before age 59½ are still subject to ordinary income tax on gains plus a 10% IRS penalty, and gains come out first under the standard last-in-first-out rule for nonqualified contracts. The brochure materials available did not specify a free-withdrawal percentage because none is needed; the contract is fully liquid.

The all-in contract charge is 1.40% per year, consisting of a 1.25% base contract charge and a 0.15% administration charge. That is before subaccount fund expenses, which can add anywhere from roughly 0.30% to well over 1.00% per year depending on the funds chosen. Stacked together, a buyer can easily be paying 1.70% to 2.40% per year all-in. The honest read is that 1.40% is the price of the wrapper — tax deferral, the death benefit, the fixed account, and zero surrender. Whether that is worth the drag depends entirely on the holding period, the marginal tax bracket, and whether the death-benefit ratchet matters to the buyer.

Legal Entity: Security Benefit Life Insurance Company

Parent: Eldridge Industries

A.M. Best Rating: A-

Security Benefit has been issuing variable annuities for decades, and the Variflex line is one of its older platforms. The A- A.M. Best rating sits below the A or A+ ratings carried by some larger national VA carriers, which is worth weighing for buyers focused on issuer strength.