How can variable life insurance policy owners make withdrawals?

Variable life insurance policies provide policy owners with a unique feature that allows them to access the cash value of their policy. The correct approach for making withdrawals from a variable life insurance policy is through the cancellation of units.

In a variable life policy, the cash value is invested in various sub-accounts, which may include stocks, bonds, or mutual funds. This means that the policy owner's equity in the policy is represented in units that correspond to the performance of these investments. When policy owners want to make a withdrawal, they effectively cancel a certain number of these units. By doing so, they withdraw their accumulated cash value based on the current performance of their investments, adjusting their death benefit as necessary.

This method allows for flexibility since the amount withdrawn can vary depending on the number of units cancelled, making it possible to withdraw small or large amounts as needed. It is important to note that other methods mentioned in the various choices may imply fixed monetary amounts or adjustments to life cover sums, which do not accurately reflect the primary mechanism for withdrawing cash from a variable life insurance policy. Therefore, cancelling units aligns directly with the operational structure of variable life insurance.