Final answer:
The greatest risk in a variable life insurance policy is market risk.
Step-by-step explanation:
The greatest risk in a variable life insurance policy is market risk.
Market risk refers to the potential for investments to decrease in value due to fluctuations in financial markets. In a variable life insurance policy, the policyholder's funds are invested in various financial instruments such as stocks and bonds. If these investments perform poorly due to market volatility, the policyholder may experience a decrease in the value of their policy.
In contrast, credit risk refers to the risk of default on loans or other forms of debt, inflation risk refers to the decrease in purchasing power over time, and interest rate risk refers to fluctuations in interest rates affecting the cost of borrowing or investing.