Which is NOT a characteristic of a Variable Life policy?

The focus here is on the characteristics of a Variable Life policy and what distinguishes it from other types of life insurance.

The correct answer indicates that the cash value of a Variable Life policy is not solely the value of units at the prevailing bid price. Rather, the cash value fluctuates based on the performance of the underlying investment options chosen by the policyholder. This feature reflects the nature of Variable Life insurance, where the cash value and potentially the death benefit can vary over time due to investment performance.

Understanding this characteristic is crucial because it highlights the investment risk involved with Variable Life policies. Unlike fixed products where the cash value is guaranteed, Variable Life policies expose policyholders to market risks.

In contrast, the other characteristics listed accurately describe aspects of Variable Life policies. These include the fact that it is not used solely for investment purposes (it combines life insurance coverage with investment opportunities), commission and operational expenses are covered through explicit charges deducted from the policy’s cash value or premiums, and there is indeed greater exposure to equity investments, which can lead to higher potential returns or losses. This blend emphasizes the dual role of these policies in providing both insurance coverage and investment potential, setting them apart in the market.