Which of the following statements about Variable Life policies are TRUE?

The statement that investment returns are guaranteed regardless of market performance is not accurate in the context of Variable Life policies. In fact, one of the defining characteristics of Variable Life insurance is that the cash value and death benefit can fluctuate based on the performance of the underlying investment options chosen by the policyholder. These options typically include various mutual funds with varying degrees of risk and potential returns.

The correct assertions regarding Variable Life policies center around the mechanics of how they operate, particularly in relation to pricing and management costs. For example, the offer price, which is typically higher than the bid price, is indeed used to determine how many units of the investments will be canceled when withdrawals are made. Furthermore, the difference between the bid and offer price helps to cover the management fees associated with managing the investment options of the variable policy. Finally, the policy value, which reflects the total cash value of the policy, is calculated based on the bid price of the units allocated within it, which can vary based on market conditions.

Understanding the way Variable Life policies function highlights the investment risks involved and clarifies the nature of potential returns, which are variable and not guaranteed, making it important for policyholders to monitor their investment choices and performance actively.