How are dividends treated in Variable Life Insurance?

In the context of Variable Life Insurance, it is essential to understand how dividends function compared to other types of life insurance products. Policies such as whole life insurance often provide policyholders with dividends derived from the insurer's profits, but Variable Life Insurance works differently.

Variable Life Insurance policies do not typically pay dividends. Instead, the investment component of a Variable Life policy allows the policyholder to allocate their cash value among various investment options like stocks and bonds. The returns on these investments, rather than traditional dividends, are reflected in the policy's cash value and death benefit, which can vary based on the performance of the selected investments. Therefore, stating that these policies do not pay dividends accurately captures the distinction that Variable Life Insurance has from other types of life insurance that do offer dividends.

This structure highlights the investment aspect of Variable Life, illustrating that the policyholder's returns depend on market performance rather than guaranteed dividends. Hence, option B is correct as it aptly describes the nature of dividends in Variable Life Insurance.