How can a secondary market for Variable Life Insurance policies impact policyholders?

A secondary market for Variable Life Insurance policies plays a significant role in providing liquidity to policyholders. By allowing individuals to sell their insurance policies to other investors, policyholders gain the opportunity to access cash that might otherwise be tied up in the policy. This can be particularly beneficial for those who may no longer need the insurance or require funds for other purposes.

Additionally, the liquidity provided by a secondary market can create more flexibility for policyholders. Instead of having to wait until the death benefit is paid out or surrendering the policy for potentially less than its market value, policyholders have an alternative option to realize immediate value from their investment.

This dynamic can also serve to increase the overall market efficiency for life insurance products by allowing for more realistic pricing based on current policyholder circumstances and market conditions. In summary, the presence of a secondary market caters to the financial needs of policyholders by offering an avenue for selling their policies, thus providing potential liquidity.