Which of the following statements about the differences between variable life and endowment policies are FALSE?

The accurate understanding of variable life and endowment policies is essential for distinguishing their characteristics, especially when assessing the roles of benefits and risks. The statement that benefits and risks of variable life and endowment policies accrue solely to the insurance provider is false.

In variable life insurance, the policyholder assumes a significant portion of the investment risk because the cash value and death benefits of the policy are linked to the performance of investment options chosen by the policyholder. Hence, if the investments perform well, the policyholder can enjoy higher benefits; conversely, if the investments underperform, the policyholder bears that risk. This means that the benefits and risks are not entirely the domain of the insurance provider but shared with the policyholder.

On the other hand, endowment policies typically offer a guaranteed benefit, assuming the insured survives the endowment period, which can lead to a more fixed risk profile for both the policyholder and the insurance provider. However, even in endowment policies, the guarantees and overall structure mean that not all risks are transferred to the insurer—they provide certain benefits and cover specific risks.

This dynamic understanding illustrates why the notion that the benefits and risks accrue solely to the insurance provider is misleading and indicates a fundamental aspect that differentiates these policy types.