What happens to the cash value upon the death of the insured?

When the insured under a variable life insurance policy passes away, the cash value of the policy is indeed combined with the death benefit and paid to the beneficiaries named in the policy. This characteristic is a defining feature of variable life insurance, which not only provides a death benefit in the event of the insured's death but also accumulates cash value that can grow over time depending on the performance of the investment options selected by the policyholder.

The cash value acts as a part of the overall value that the beneficiaries will receive upon the death of the insured, ensuring that they are compensated not just with the base death benefit but also with any additional cash value that has accrued. This combination can provide a financial safety net and is often a crucial component for beneficiaries as they manage expenses or debts after the insured's passing.

In contrast, the other options suggest outcomes that are not applicable to variable life insurance policies. The cash value is not lost to the insurance company, nor is it simply refunded to the estate or distributed among heirs without considering the designated beneficiaries. The structured nature of life insurance policies specifically directs that death benefits, along with accumulated cash value, are to be disbursed to the named beneficiaries rather than being distributed according to probate or intestacy laws. Thus,