Which of the following best describes the policy benefits of variable life policies?

Variable life insurance policies provide benefits that are contingent upon the performance of underlying investments. This means that the cash value and potentially the death benefit of the policy can fluctuate based on how well the investment options (typically mutual funds) perform. The policyholder often has the ability to choose how their premiums are allocated among various investment options, which can be equities, bonds, or other securities.

Because the benefits are directly tied to these investment choices, they can increase or decrease in value, reflecting market conditions. This flexibility and potential for growth is a hallmark feature of variable life insurance, distinguishing it from other types of life insurance that may have more fixed benefits or guaranteed cash values.

In contrast, some of the other options might represent features of different types of insurance policies. For example, a policy with guaranteed benefits does not typically incorporate investment performance, which is not the case for variable life policies. Similarly, benefits based on performance of the life company would not encompass the individual investment choices a policyholder makes, whereas the correct choice explicitly focuses on the investment performance outcomes themselves.