What factor can affect the death benefit in a Variable Universal Life policy?

In a Variable Universal Life (VUL) policy, the death benefit can fluctuate based on the market value of the investments made within the policy. Unlike whole life policies that have a fixed death benefit, VUL policies allow policyholders to allocate their cash value among various investment options, such as stocks and bonds. The performance of these investments directly impacts the cash value of the policy, which in turn can influence the death benefit if the policyholder has chosen a death benefit option that varies with cash value.

When the investments perform well and the value of the underlying assets increases, the death benefit can rise accordingly. Conversely, if the investments decline in value, it can lead to a decreased death benefit, especially if the policyholder has taken withdrawals or if the policy is structured where the death benefit is affected by the cash value. Therefore, market value fluctuations of investments are a pivotal factor in determining the amount that beneficiaries will receive upon the insured's death.

Changes in the insured's health status, withdrawals exceeding cash value, or premium payment levels can impact the policy's overall performance and sustainability but do not directly affect the death benefit as significantly as market value fluctuations do.