What is a key feature of variable life insurance policies?

Variable life insurance policies are distinctive because they allow the policyholder to invest the cash value of the policy in various investment options, such as equities, bonds, and mutual funds. This feature enables policyholders to potentially increase the cash value of their policy based on market performance, giving them the opportunity for growth and the potential for higher returns compared to other types of permanent life insurance products that typically offer guaranteed cash values.

This investment aspect is central to variable life policies, as it differentiates them from more traditional life insurance products that often have fixed interest rates or guaranteed cash values. By engaging with equities, the policyholder shares in the risks and rewards of the financial markets, a fundamental characteristic of variable life insurance.

The other options emphasize features that are not aligned with the variable life insurance framework: fixed premiums and guaranteed benefits are typical in other life insurance policies, such as whole life or term insurance, which do not incorporate the investment variety present in variable life policies.