Final answer:
The face amount of a Variable Universal Life (VUL) insurance policy can increase if the investments tied to the policy's cash value perform well. This performance allows the cash value to grow, depending on the policy's terms.
Step-by-step explanation:
The face amount of a Variable Universal Life (VUL) insurance policy can increase based on the performance of the policy's cash value investments. VUL is a type of permanent life insurance that builds cash value, which is invested in a range of market portfolios.
The policyholder can choose where to invest among available options, typically consisting of stocks, bonds, mutual funds, or other types of assets.If the investments perform well, the cash value can grow significantly, which in some cases can lead to an automatic increase in the death benefit.
However, this is contingent on the type of VUL policy and the options chosen at purchase. Many policies provide a guaranteed minimum death benefit, while any excess cash value can either increase the death benefit or be withdrawn during the policyholder's lifetime, subject to policy terms and conditions.
It's also important for policyholders to monitor their investments, as poor performance can potentially reduce the cash value, requiring additional premiums to maintain the initial death benefit.