What distinguishes variable life insurance from other types?

Variable life insurance is unique because it combines a death benefit with an investment component, allowing policyholders to allocate their premiums among various investment options like stocks, bonds, and mutual funds. This structure allows the cash value and potentially the death benefit to fluctuate based on the performance of the selected investments, which is a key characteristic that sets variable life insurance apart from other types of life insurance, like whole or term life, that generally offer fixed benefits.

The investment component introduces a level of risk and opportunity for growth that is not found in policies with fixed cash value or those that guarantee a certain return. This means policyholders have the potential to accumulate value beyond their initial premiums, depending on market performance, which adds an element of flexibility and potential for greater returns. In contrast to the other options, variable life insurance distinctly incorporates investment options that can lead to variable returns, highlighting its dual function as both an insurance and an investment vehicle.