In variable universal life insurance, what does the term "variable" refer to?

The term "variable" in variable universal life insurance refers to the ability of both the cash value and the death benefit to fluctuate based on the performance of the investment options chosen by the policyholder. In a variable universal life policy, the cash value is invested in a variety of investment vehicles, such as stocks and bonds. As these investments perform well or poorly, the cash value can increase or decrease accordingly.

Additionally, the death benefit can also change, as it is often tied to the cash value of the policy and may vary depending on the investment performance. This flexibility allows policyholders to potentially increase their cash value and death benefit over time, making it a unique feature of this type of insurance compared to whole life policies, which typically have fixed cash values and death benefits.

The other aspects mentioned in the choices, such as premium payments, policy loans, and interest rates, do not capture the essence of the term "variable" in the context of this insurance product. Premium payments are typically flexible within certain limits, policy loans can be taken against the cash value, and interest rates may apply to the cash value depending on the policy’s terms. However, none of these directly relate to the variability indicated by the term "variable."