How does a Variable Universal Life Insurance policy differ from a traditional life policy?

A Variable Universal Life Insurance policy is unique in that it provides both a death benefit and a cash value component that is tied to the performance of various investment options, including stocks and bonds. The key distinguishing feature is that the cash value can fluctuate based on the performance of these underlying investments. This means that policyholders have the opportunity for their cash value to grow significantly if the investments perform well, or potentially decline if the investments do not perform well.

This characteristic attracts individuals who are looking for a life insurance product that not only offers protection but also allows them to have some control over the investment component. In contrast, traditional life insurance policies often have fixed cash values and guaranteed face amounts, providing more stability but less growth potential. As a result, understanding this dynamic is crucial for those evaluating their options between variable and traditional life insurance products.