How does a Variable Life Insurance policy differ from a Universal Life policy?

A Variable Life Insurance policy differs fundamentally from a Universal Life policy in that it allows the policyholder to allocate their cash value among a variety of investment options, which can include stocks, bonds, and mutual funds, leading to the potential for variable returns based on market performance. This investment element is a defining characteristic of Variable Life policies, providing an opportunity for growth but also introducing a degree of risk.

In contrast, Universal Life insurance typically offers more stable cash value growth, usually tied to a fixed interest rate set by the insurer rather than variable market options. This means that the policyholder does not experience the same level of potential fluctuation in the cash value as they would with Variable Life insurance. The flexibility in premium payments and death benefit amounts in Universal Life policies is a key feature, but it does not encompass the variable investment risk associated with Variable Life policies.

Thus, the correct answer captures the essence of this key distinction between the two policy types.