How are protection costs under a Variable Life insurance policy typically met?

In a Variable Life insurance policy, the protection costs are typically met by the cancellation of units in the fund. This means that as the cost of insurance protection increases—often based on age, health, and other factors—the insurer will deduct the necessary amount from the value of the investment account. This method allows policyholders to have flexible premium payments and investment choices while ensuring that the insurance coverage remains in effect.

The policyholder invests premiums into various sub-accounts, and as costs for insurance protection arise, the necessary units reflecting these costs are systematically canceled from these accounts. This approach keeps the insurance component and savings/investment aspects of the policy integrated, allowing for ongoing management of the policy without requiring additional payments out of pocket specifically for protection costs.

Other options may reference elements of policy structure or cost allocation, but they do not accurately represent the primary mechanism through which protection costs are addressed in Variable Life insurance. Thus, the cancellation of units is a distinctive and defining feature of how protection costs are managed within these policies.