What is a Variable Life Insurance policy?

A Variable Life Insurance policy is characterized as a permanent insurance policy that includes a cash value component which can fluctuate based on the performance of investment options chosen by the policyholder. This allows the policyholder to participate in investment opportunities, such as stocks and bonds, which can lead to potential increases (or decreases) in the cash value of the policy.

The prominence of the cash value component in Variable Life Insurance is important. Unlike term life insurance, which offers only a death benefit for a set period, a Variable Life Insurance policy builds cash value over time. This cash value can be accessed through loans or withdrawals, providing flexibility to the policyholder in managing their financial needs.

In addition, the investment aspect introduces an element of risk and reward; the policyholder's choices can impact both the cash value accumulation and the death benefit amount. Therefore, a Variable Life Insurance policy provides a combination of life insurance coverage and the potential for investment growth, distinguishing it from policies that only offer fixed returns or temporary coverage.