What is the "cost of insurance" charge in Variable Life policies?

The "cost of insurance" charge in Variable Life policies refers to the expense incurred to provide the death benefit coverage to the policyholder. This charge is typically deducted from the policy’s cash value and is calculated based on various factors, including the insured's age, health, and the amount of the death benefit. As the policyholder ages, this cost can increase due to the higher risk associated with older individuals. This feature of Variable Life policies highlights the adjustable nature of the insurance component, where the cost can change over time depending on the insured's profile and actuarial calculations.

Understanding this charge helps policyholders to accurately assess the impact of their insurance costs on the overall performance and value of the policy. The other choices offered do not accurately capture the essence of the "cost of insurance" charge as they refer to different aspects of the policy, such as premium payments, investment management fees, or administrative expenses, none of which specifically define the expense associated with providing the death benefit.