What are "subaccounts" in Variable Life policies?

In Variable Life policies, "subaccounts" refer to the investment options within the policy. Each subaccount operates similarly to mutual funds, allowing policyholders to direct their premiums into different investment portfolios based on their risk tolerance and investment objectives. This flexibility is a fundamental feature of variable life insurance, as it enables policyholders to potentially grow their cash value through various investments, which can include stocks, bonds, or even money market funds, depending on what the insurance provider offers.

The design of subaccounts allows policyholders to adjust their investment strategy as their financial situations or market conditions change. As the investments in the subaccounts perform, they directly impact the cash value of the policy and potentially the death benefit as well, depending on how the policy is structured. This distinguishes variable life policies from whole life policies, where cash value growth is typically at a fixed interest rate set by the insurer.