What distinguishes Variable Life Insurance from other types?

Variable Life Insurance is primarily distinguished from other types of life insurance by the fact that the benefits vary based on underlying investments. This means policyholders have the opportunity to allocate their premiums to a selection of investment options, such as stocks, bonds, or mutual funds. Consequently, the cash value and possibly the death benefit of the policy can increase or decrease depending on the performance of these investments. This contrasts with whole life or term life insurance, which typically provide fixed benefits or premiums that do not change based on market performance.

The nature of Variable Life Insurance allows for potential growth in cash value beyond just the standard interest earning found in whole life policies. However, it also introduces greater risk, as poor investment performance can lead to reduced benefits. This differentiation in variability and the linkage to investment performance is a core characteristic that sets Variable Life Insurance apart from other insurance products.