Complete Analysis & Legal Rationale

Variable life insurance is a permanent life insurance contract that combines death benefit protection with an equity separate account: (1) Guaranteed Death Benefit: As long as premiums are paid, the policy provides a minimum death benefit floor; (2) Cash Value Risk: Cash value is directed into variable separate account subaccounts (stocks, bonds) chosen by the policyholder. Because the policyholder bears the investment risk, there is NO minimum cash value guarantee (cash value can drop to zero if markets fall); (3) Regulation: Variable life is both a security (SEC/FINRA) and insurance (state commissioner).