Final answer:
The surrender value of a variable life policy is determined by the performance of the chosen investment options and can fluctuate. It differs from whole life insurance's guaranteed cash value. The cash value functions as an investment account available for the policyholder's use if surrendered.
Step-by-step explanation:
The type of surrender value that a variable life policy has is dependent on the performance of the investment options that the cash value portion of the policy is invested in. Unlike traditional whole life insurance, which offers a guaranteed cash value, the surrender value of a variable life policy can fluctuate due to market conditions. The cash value in a variable life policy functions as an investment account, which allows for potential growth but also comes with risks.
If the policyholder decides to surrender their policy, they would receive the current cash value minus any surrender charges. This surrender value can be used by the policyholder for any purpose, similar to a personal savings account.