What happens to the death benefit in a Variable Life Insurance policy if the cash value decreases?

In a Variable Life Insurance policy, the death benefit is impacted by the performance of the investment component which is linked to the cash value of the policy. When the cash value decreases, it typically indicates that the investments within the policy have lost value.

In many Variable Life policies, the death benefit is structured to include a minimum guaranteed amount plus the cash value. If the cash value decreases significantly, the overall death benefit may be adjusted downward proportionately. This means that the total amount payable upon death may reduce in alignment with the drop in cash value, depending on the policy's specific terms.

Understanding this relationship is crucial for policyholders as it highlights the inherent risks of a Variable Life policy, where investment performance directly influences both cash value and death benefit, unlike more traditional life insurance products.