What is a "policy loan" in the context of Variable Life Insurance?

In the context of Variable Life Insurance, a policy loan refers to borrowing against the cash value accumulated in the policy. This allows the policyholder to access funds without terminating the policy. The cash value is an important component of variable life insurance, as it grows over time and can be utilized by the policyholder when needed.

Taking a loan against the cash value lets the insured use their investment without facing withdrawal penalties or tax implications that usually accompany cash withdrawals. Furthermore, the amount borrowed typically does not require repayment in the traditional sense, as any outstanding loan plus interest is deducted from the death benefit upon the policyholder's passing.

Policy loans provide financial flexibility and support for various needs, which can include emergencies, education expenses, or other important financial goals. This understanding emphasizes why option B accurately describes the nature of policy loans within the framework of Variable Life Insurance.