What characteristic of universal life policies allows for variations in return?

The characteristic of universal life policies that allows for variations in return is the nature of fluctuating returns. Universal life insurance combines life insurance coverage with a cash value component that can grow based on interest rates or investment performance. Unlike traditional whole life policies that typically offer fixed returns, universal life policies provide policyholders with the flexibility to allocate their cash value into different investment accounts, which may perform differently in various market conditions.

This means that the returns on the cash value component can fluctuate depending on how the underlying investments are performing, hence creating the potential for varying growth rates over time. Policyholders can often choose between fixed accounts, which may offer guaranteed minimum returns, or more variable investment accounts, which can lead to higher potential returns but come with increased risk.

Utilizing this variability allows policyholders to potentially increase their cash value growth but also introduces the uncertainty of fluctuating investment performance. Therefore, the emphasis on fluctuating returns clearly aligns with the nature of universal life policies, distinguishing them from other types of life insurance that provide more stable and guaranteed returns.