What is a key characteristic of variable insurance policies?

Variable insurance policies are uniquely characterized by the fact that their investment returns can vary. This means that the cash value and possibly the death benefit of the policy can fluctuate based on the performance of the underlying investments chosen by the policyholder. Unlike whole life insurance, which offers guaranteed cash value accumulation, variable policies allow policyholders to invest in a range of options such as stocks, bonds, or mutual funds. As a result, the value of the policy can rise or fall depending on market conditions, making it a more dynamic and potentially lucrative option for those willing to accept some level of risk.

This variability in returns is fundamental to understanding how variable insurance works, and it is what distinguishes it from other types of life insurance products that provide fixed benefits or guaranteed returns.