How does variable life insurance differ from other life insurance types?

Variable life insurance is unique compared to other types of life insurance primarily because it allows for both the death benefit and the cash value to fluctuate based on the performance of the underlying investment options selected by the policyholder. This dynamic nature means that the policyholder has the ability to allocate their premiums among various investment vehicles, such as stocks, bonds, or mutual funds, which can lead to varying returns.

As the investments perform well, the cash value and possibly the death benefit can increase, providing a potential for growth that is not typically available in other life insurance products, which often have fixed premiums and a guaranteed death benefit. Conversely, if the investments perform poorly, the cash value and death benefit may decrease, exposing the policyholder to a degree of risk that is not present in more traditional life insurance products.

This combination of death benefits and cash value that can rise and fall based on investment performance fundamentally sets variable life insurance apart from options characterized by fixed benefits or coverage for specific health-related issues. Additionally, variable life insurance is not solely a term product; it is a permanent form of life insurance that remains in force throughout the policyholder's lifetime as long as premiums are paid.