Which statement about investment risk in Variable Life is TRUE?

The accurate statement regarding investment risk in Variable Life is that investing in high equity Variable Life funds increases risk but potential returns. This reflects the nature of equity investments, which tend to be more volatile than other asset classes, such as bonds or cash equivalents. As a result, while there is a higher risk when investing in equities, the potential for greater returns is also present, especially over long investment horizons.

Variable Life insurance products allow policyholders to choose from various investment options, including stock funds, which can fluctuate in value. Policyowners who select high-equity funds must be prepared for the ups and downs of the market, which is indicative of the investment risk associated with these types of policies. The correlation between increased risk and the possibility of higher returns is a fundamental concept in investing and is particularly true in Variable Life policies that are heavily weighted toward equities.