New Jersey Life Producer Practice Exam 2026 – Your Complete All-in-One Guide to Exam Success!

Variable life insurance policies come with several investment-related risks, one of the primary ones being that the performance of the underlying investments can negatively affect the cash value of the policy. Unlike whole life insurance, which typically provides guaranteed cash value growth, variable life insurance's cash value is linked to the performance of specific investment options chosen by the policyholder. If the investments perform poorly, the cash value can decrease, which may also affect the death benefit if the cash value falls significantly.

This reflects a fundamental characteristic of variable life insurance, where policyholders have more control and influence over their investment choices but also bear the associated risks of market fluctuations. Thus, understanding this risk is essential for individuals considering variable life insurance as they must be prepared for the potential decrease in cash value based on market conditions.