What distinguishes variable universal life policies from traditional universal life policies?

Variable universal life policies are characterized by their investment flexibility among various asset classes, particularly equities. This feature allows policyholders to allocate their cash value among a range of investment options, including stocks, bonds, and mutual funds. As a result, the cash value and potentially the death benefit can vary based on the performance of these investments.

In contrast, traditional universal life insurance typically offers a fixed interest rate on the cash value component, without the option for policyholders to decide how their funds are invested. This means that policyholders in traditional universal life policies do not enjoy the same level of control or potential for growth that comes with the investment options available in variable universal life policies.

The other choices do not accurately capture the essence of the differentiation. Guaranteed returns on investments would align more with products like whole life insurance rather than the investment nature of variable policies. The statement about no premiums being required does not apply because both variable universal life and traditional universal life insurance policies require premium payments. Finally, while higher death benefits can be a feature of some life insurance policies, they are not a distinguishing characteristic that separates variable universal life from traditional universal life. Therefore, the key distinction rests on the investment flexibility offered by variable universal life policies.