Which of the following statements best describes "variable life" policies?

Variable life policies are designed to provide policyholders with a combination of life insurance protection and investment opportunities. The key feature of variable life insurance is that it is a flexible premium policy, which means that the policyholder can adjust their premium payments and the amount of insurance coverage. The investment component of the policy allows policyholders to allocate their cash value among various investment options, such as mutual funds or stock accounts. As a result, the returns on a variable life policy can fluctuate based on the performance of these underlying investments.

Because of this structure, the cash value and potentially the death benefit of the policy can increase or decrease depending on the market performance of the chosen investments. This characteristic distinctly separates variable life insurance from more traditional fixed policies, where returns are guaranteed and premiums are typically set at a fixed amount.

Being aware of this, it’s clear that option B accurately encapsulates the nature of variable life policies, highlighting their flexibility in premium payments and their ties to varying investment returns.