What constitutes good practice regarding portfolio management in Variable Life Insurance?

Good practice regarding portfolio management in Variable Life Insurance involves regular assessments and adjustments of investment allocations. This approach is essential because the financial markets are dynamic and can change rapidly due to a variety of factors such as economic shifts, interest rates, and overall market conditions. Consistently reviewing and realigning investments allows policyholders to maximize returns and manage risks more effectively.

By actively monitoring the performance of each investment component, policyholders can identify underperforming assets and make informed decisions about reallocating funds to more promising alternatives. This proactive strategy helps ensure that the investment portfolio remains aligned with the policyholder's financial goals, risk tolerance, and changing life circumstances. It supports the principle of dynamic asset allocation, which is crucial for optimizing returns in a Variable Life Insurance policy.

Maintaining investments in the same portfolio indefinitely, choosing the least risky option without reassessment, or automatically following the previous year's allocations do not allow for adaptation to changing market conditions or personal financial objectives, which can lead to missed opportunities for growth and increased exposure to risk. Therefore, regular assessments and adjustments are key to effective portfolio management in this context.