Variable Life Insurance
This is an interesting type of life insurance policy because the cash value is dependent on investments, and therefore is not stable like a regular life insurance policy. This is a risky life insurance policy because it depends on investments. The cash value changes depending on how the investment (which the policy is tied to) fares in the market, which is why this type of policy is called variable.
What kind of investment is it? Well, it usually is market-type of fund, such as stocks or equity assets. Variable also refers to the death benefit (which is also tied to the cash value of the policy), which can go up and down throughout the term depending on the investment. However, in your contract, your life insurance company should state how low the death benefit is allowed to go.
The cash benefit value is calculated by taking the investment value at the policy’s termination date. The death benefit value is calculated by taking the investment value at the insured’s date of death.
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