Final answer:
Variable Universal Life insurance (VUL) offers a death benefit feature that can fluctuate based on the performance of its investment options. This provides potential for higher returns on the policy's cash value, but also comes with higher risks.
Step-by-step explanation:
In Variable Universal Life insurance (VUL), the death benefit feature refers to the amount of money that is paid to the beneficiaries upon the death of the policyholder. Unlike whole life insurance, VUL allows the policyholder to invest a portion of their premium into various investment options, such as stocks, bonds, or mutual funds. The cash value of the policy grows over time based on the performance of these investments.
This means that the death benefit in VUL is not fixed but can vary depending on how the investments perform. If the investments perform well, the cash value and potentially the death benefit could increase. On the other hand, if the investments perform poorly, the cash value and death benefit could decrease.
This flexibility in VUL makes it attractive to individuals who want the potential for higher returns on their policy's cash value, but it also comes with higher risks compared to traditional whole life insurance.