Which statement regarding the liquidity of Variable Life policies is INCORRECT?

The statement that cash value remains fixed until the policy is surrendered is incorrect because the cash value of Variable Life policies is not static; it fluctuates based on the performance of the sub-accounts in which the policyholder chooses to invest. Unlike whole life insurance, where the cash value grows at a guaranteed rate, the cash value in Variable Life policies can increase or decrease over time, reflecting the investment performance. This inherent design allows policyholders to potentially grow their cash value based on market conditions, rather than it being fixed until surrender.

On the other hand, accessing cash value through loans or withdrawals, using it as collateral for loans, and recognizing that withdrawals can impact the death benefit are all accurate statements about the liquidity of Variable Life policies. Loans against the cash value provide immediate liquidity, while withdrawals may reduce the policy's death benefit, reflecting the dynamic nature of cash value in such policies.