What is the purpose of the cash value in a variable universal life insurance policy?

The cash value in a variable universal life insurance policy serves as an investment component that reflects the performance of the underlying investment options selected by the policyholder. Unlike traditional whole life policies that have a guaranteed cash value, the cash value in variable universal life insurance can fluctuate based on the investment choices made, such as stocks, bonds, or mutual funds.

This characteristic allows policyholders to potentially increase their cash value based on market performance, offering a dual benefit of life insurance coverage and investment growth. The policyholder has the flexibility to manage how their cash value grows, aligning with their financial goals and risk tolerance. This is fundamentally different from fixed-value options which do not offer the same investment growth potential, ultimately highlighting why this aspect aligns with the choice that emphasizes investment performance.