Traditional variable whole life insurance is characterized by fixed, level premiums combined with investment-directed cash values held in one or more separate accounts. The policyowner generally chooses among available separate-account investment options, and policy values fluctuate according to the investment performance of those accounts.

Because investment performance is variable, the insurer does not guarantee a fixed rate of return on the separate-account assets. Likewise, cash values are not guaranteed in the same manner as traditional whole life cash values. The policyowner bears the investment risk, which means favorable performance can increase policy values while unfavorable performance can reduce them.

A variable life contract generally provides a guaranteed minimum death benefit if required premiums are paid, although the actual death benefit can increase depending on investment performance and the policy design. This should not be confused with a guaranteed minimum rate of return, which variable life does not provide.

The fixed-premium characteristic also distinguishes variable life from variable universal life, which combines separate-account investment risk with the flexible-premium characteristics of universal life.

Thus, among the four alternatives, the standard defining characteristic of variable life is fixed level premiums.

Study Guide Reference: Types of Life Insurance Policies — variable life; separate accounts; investment risk; fixed premiums; variable universal life distinctions.