Which type of life insurance policy provides a death benefit that varies based on the performance of investments?

Variable life insurance is designed to combine the features of both life insurance and investment. With this type of policy, the death benefit and possibly the cash value can fluctuate based on the performance of the investment options chosen by the policyholder. These options might include stocks, bonds, or mutual funds, which means that the insured can allocate premiums among these investment accounts. As a result, the cash value of the policy might grow more significantly than in whole life policies, which offer guaranteed growth and fixed premiums.

In variable life insurance, the policyholder assumes the investment risk, and the policy's value can rise and fall with market conditions. If investments perform well, the insured may enjoy a higher death benefit and cash value. Conversely, if the investments underperform, both the death benefit and cash value could decrease.

This feature sets variable life apart from other types of life insurance like whole life, term life, and universal life, which do not offer this variable investment component. Whole life provides a guaranteed death benefit and cash value accumulation at a fixed rate. Term life offers pure death benefit coverage for a specified period with no cash value component, while universal life combines flexible premiums with a cash value growth linked to interest rates, but it does not involve direct investment in securities