What occurs if the cash value of a Variable Life Insurance policy dips below a specified level?

In a Variable Life Insurance policy, the cash value is tied to the performance of the underlying investments, which can cause fluctuations. If the cash value decreases significantly and falls below a certain minimum level, it may not be sufficient to cover the cost of insurance. In such cases, the policy can lapse if premiums are not paid to maintain coverage. This means that if the policyholder does not make additional premium payments to ensure that the cash value can cover the costs imposed by the insurer, the policy could terminate, leading to loss of benefits.

It's crucial for policyholders to monitor the performance of their investments and the cash value, as a drop below the specified threshold can put the policy at risk, emphasizing the need for adequate funding. This situation highlights the potential risk associated with variable life insurance, particularly in market downturns.