In a variable life insurance policy, what influences the cash value?

In a variable life insurance policy, the cash value is primarily influenced by the performance of the investment portfolio. Unlike traditional life insurance products where the cash value grows at a guaranteed rate, variable life insurance allows policyholders to allocate the cash value among various investment options, such as stocks, bonds, or mutual funds. The value of these investments can fluctuate based on market conditions, which directly affects the cash value of the policy.

As a result, if the investments perform well, the cash value increases; if they perform poorly, the cash value may decrease. This feature provides policyholders with the potential for greater growth but also comes with the risk of loss, making the performance of the investment portfolio a critical factor in the overall value of the policy.

In contrast, the insured's age may impact premiums and coverage but does not directly influence cash value. The premium payment frequency affects the timing of cash value accumulation but not its amount or growth. The financial strength of the insurance company is essential for overall security and claims-paying ability, but it does not directly impact the cash value tied to the specific investment choices within a variable policy.