The Risk of Variable Life Policies: When Cash Value Performance Falls Short

Variable Life Insurance (VL) offers the highest potential for cash value growth among permanent policies, but this comes with the greatest risk: the policyholder bears the full burden of poor investment performance.

[Image of a graph showing investment returns of stock market volatility]

Direct Market Risk

The cash value in a VL policy is invested directly into segregated investment accounts (sub-accounts) chosen by the policyholder. Key risks include:

• **Loss of Principal:** Unlike Whole Life or IUL, the VL policy has no guaranteed floor. A poor-performing sub-account can result in the loss of cash value, including the principal premiums paid.
• **Policy Lapse:** If investment returns are insufficient to cover the escalating Cost of Insurance (COI) and administrative fees, the cash value will decline to zero, and the policy will lapse.
• **Required Premium Increase:** The policyholder may be forced to pay significantly higher premiums later in life to prevent a lapse caused by prolonged poor market performance.

Disclaimer: This content is for informational purposes only and is not financial or legal advice. Variable Life is a security product and requires a high-risk tolerance and active management.