What may happen to a Variable Life Insurance policy if cash values fall significantly?

In a Variable Life Insurance policy, the cash value is tied to the performance of the investments chosen within the policy. If the cash values fall significantly, it can lead to potential issues regarding the insurance coverage. Specifically, if the cash value decreases to a level that is insufficient to cover the policy's cost of insurance and other associated expenses, the policy may lapse if policyholders do not make additional premium payments or if they do not meet the required minimum levels.

Maintaining minimum cash value levels is crucial because these values directly impact the policy's ability to sustain its coverage. If the cash values drop significantly and the policyholder doesn’t take action, such as paying increased premiums or adding more funds, the coverage could be jeopardized, resulting in a lapse. This risk of losing coverage highlights the importance of monitoring the investment performance within a Variable Life Insurance policy and being proactive in maintaining adequate funding levels.