If a Variable Universal Life Insurance policy's investments perform poorly, what is one of the key features that protects the policyholder?

The correct response highlights a key feature of Variable Universal Life Insurance policies, which is designed to offer some safeguard to the policyholder amid poor investment performance. Specifically, the statement regarding cash value ensures that, in the event of negative market conditions, the cash value accumulated in the policy cannot decrease as a result of investment performance.

While Variable Universal Life policies allow for investment in various accounts, the principal feature that mitigates downside risk to the cash value is the protection against declines. This means that the policyholder's cash value remains intact, preventing losses directly tied to the market volatility affecting the investment component.

Other options present aspects of the policy that may be beneficial but don't provide the same protective mechanism. For instance, the ability to switch funds freely refers to the policyholder's flexibility in adjusting their investments, while guaranteed loan amounts and fixed premium payments relate to other aspects of policy structure and costs, rather than a direct safeguard against poor investment performance. Understanding this protection feature is essential, as it allows policyholders to maintain some level of financial security in their life insurance product, regardless of market fluctuations.