Which of the following statements is true about Variable Whole Life (VLI) and Variable Universal Life (VUL) policies?

Variable Whole Life (VLI) and Variable Universal Life (VUL) policies are designed to provide both life insurance coverage and an investment component. The key characteristic that sets them apart is their investment component, wherein policyholders have the flexibility to direct their cash value into various investment options such as stocks and bonds.

The correct statement indicates that these policies do not guarantee cash value. This is primarily because the cash value of these policies is tied to the performance of the underlying investment options chosen by the policyholder. Unlike traditional whole life policies, which typically guarantee a certain cash value, VLI and VUL policies expose the policyholder to investment risk, meaning the cash value can fluctuate based on market performance.

This feature emphasizes the importance of understanding market risks and the nature of these products for potential policyholders. Thus, while they provide certain benefits like flexibility and potential for growth, they also come with the risk of not having guaranteed cash value, depending on the investment performance.