What does a "policy lapse" indicate in Variable Life Insurance?

A "policy lapse" in Variable Life Insurance indicates that the policy has failed due to unpaid premiums or insufficient cash value. When a policyholder does not pay the required premiums, or if the cash value of the policy falls below the necessary amount to cover policy expenses, the insurance policy will lapse. This means that the coverage is no longer in effect, and the insured would not be entitled to any benefits under the policy.

It is essential for policyholders to understand that variable life insurance is tied to investment performance, which can affect the cash value. If the cash value declines significantly, combined with unpaid premiums, it can lead to a situation where the policy cannot sustain itself and ultimately lapses. Thus, monitoring both premium payments and the performance of the investments is crucial to maintain the policy in force.