Which statement about the death benefit of a traditional variable life insurance policy is correct?

Why A is correct

Traditional variable life insurance invests premiums in subaccounts held in a separate account, so cash values rise and fall with investment performance. However, the policy guarantees a minimum death benefit equal to the face amount stated at issue. Investment performance can increase the cash value and drive the death benefit above the guaranteed minimum, but the benefit cannot fall below it. This floor is what distinguishes variable life from variable universal life, which does not offer the same guaranteed minimum death benefit.

Why the other options are wrong

• B) Variable life guarantees a minimum death benefit equal to the face amount; the benefit cannot fall below it, so a total absence of any guarantee is incorrect. The guarantee operates as a floor, not as an assurance that the benefit never changes at all.
• C) The death benefit is established and guaranteed at issue; surrender terminates the policy and has nothing to do with fixing the death benefit. Surrender ends the contract entirely and is unrelated to how the death benefit is determined.
• D) The death benefit equals the guaranteed face amount minimum, not the cash value; the cash value may be far lower, which is exactly why the guarantee matters. The death benefit floor protects the beneficiary even when the separate account performs poorly.

Memory hook

Variable life: cash values ride the market, death benefit rides on a guaranteed floor.