The same companies that developed adjustable life contracts subsequently developed a variation on that contract�variable adjustable life. As its name suggests, this coverage is an adjustable life policy that can be negotiated to change the death benefit level up or down, or to increase or decrease premium amounts to a new fixed level, which can shorten or lengthen the premium-paying period. The new feature is, of course, the policyowner�s ability to choose the investment portfolio, within limits. This contract actually overcomes one of the shortcomings of the fixed-premium variable life contract by allowing the policyowner to negotiate with the insurance company a changed policy configuration that more closely fits the policyowner�s changed circumstances.

The policyowner does not have the unilateral right to skip premium payments or vary the amount of any one premium payment at will without prior negotiation with the insurance company. As with the first generation of variable life insurance contracts, the death benefit is tied to investment performance but guaranteed never to be less than the original amount of coverage under the policy.

Most of the insurance companies offering variable adjustable life coverage chose not to enter the universal life market. In fact, they introduced variable adjustable life insurance as a defensive move to enhance their competitiveness after the marketing success of universal life with its flexible-premium design.