Final answer:
Variable Life insurance offers both level premiums and a selection of investment options that allow policy owners to allocate part of their premiums to various investment funds. This results in a potential for a higher return but also a higher risk. The correct option is B.
Step-by-step explanation:
The type of life insurance that allows the policyholder to have level premiums and also choose from a selection of investment options is Variable Life insurance. Variable life insurance is a form of permanent life insurance with an investment component. Policyholders can allocate a portion of their premium dollars to a range of different investment options, typically including stocks, bonds, and money market funds. These investment choices provide a potential for higher returns compared to the guaranteed cash value growth of traditional whole life insurance, but they also come with higher risk, as their value can fluctuate with the performance of the underlying investments.
Variable life insurance policies guarantee a minimum death benefit, and, if the cash value grows sufficiently, the death benefit may increase. However, if the investments do not perform well, the death benefit can decrease, subject to any guarantees stipulated by the policy. The policyholder gets the benefit of potential cash value growth while maintaining a death benefit for their beneficiaries.
Unlike term life insurance, which only provides a death benefit for a certain term, variable life insurance remains in effect for the entire life of the insured as long as the premiums are paid. Also, different from making changes to insurance coverage with convertible or adjustable life policies, policyholders of variable life insurance can directly manage their policy's investments, offering a layer of control over their policy's cash value growth.