Why is a prospectus important for applicants of Variable Life Insurance?

A prospectus is crucial for applicants of Variable Life Insurance because it provides a comprehensive overview of the risks and benefits associated with the policy. Variable Life Insurance combines features of both life insurance and investment, allowing policyholders to allocate premiums into various investment accounts. The prospectus outlines how these investments work, the potential for growth, and the risks involved, which is essential for individuals to make informed decisions about their coverage.

Understanding the risks is particularly important because the cash value of a Variable Life Insurance policy can fluctuate based on the performance of the underlying investments, meaning that policyholders may not receive guaranteed returns. Additionally, the prospectus typically includes information about fees, costs, and the overall structure of the policy, helping applicants to weigh the potential rewards against the risks.

While historical performance, legal fees, and testimonials may provide additional context, they do not capture the core objective of the prospectus, which is to help potential policyholders understand what they are investing in and the implications of their choices.