What can the cash value of variable life insurance do?

The cash value of variable life insurance is directly tied to the performance of the investment options chosen by the policyholder. This means that as the underlying assets, such as stocks or bonds, perform well, the cash value can increase. Conversely, if the investments perform poorly, the cash value can decrease. This characteristic makes variable life insurance a more dynamic option compared to whole life insurance, where the cash value is typically guaranteed and fixed.

The ability of the cash value to fluctuate reflects the nature of variable life insurance, which combines life insurance protection with an investment component. Policyholders can often choose from a variety of investment portfolios, and their choices ultimately influence the growth of the cash value. This allows for the potential for significant growth over time but also introduces risk; the cash value is not guaranteed to grow at a steady or predictable rate. Therefore, the answer indicating that the cash value fluctuates with the performance of invested portfolios accurately describes the nature of a variable life insurance policy.