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Im a little confused on insurance. Help?

Why does insurance need a large number of policyholders to make it work? And Whats the primary difference between a universal life and a variable life policy??

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1. A statistical axiom which states that the larger the number of exposure units independently exposed to loss, the greater the probability that actual loss experience will equal expected loss experience. In some instances, insurers can virtually eliminate their risk of loss by securing a large enough number of units in an insured group. Universal life is more of a generic term for a type of flexible permanent life insurance offering the low-cost protection of term life insurance as well as a savings element (like whole life insurance) which is invested to provide a cash value buildup. A form of cash-value life insurance that offers both a death benefit and an investment feature. The premium amount for variable universal life insurance (VUL) is flexible and may be changed by the consumer as needed, though these changes can result in a change in the coverage amount. The investment feature usually includes "sub-accounts," which function very similar to mutual funds and can provide exposure to stocks and bonds. This exposure offers the possibility of an increased rate of return over a normal universal life or permanent insurance policy.
2. Insurance is set up to be a "sharing of loss". As an (inaccurate) example, you put 100 people in a room. You figure out how many are going to die in the next year. You add up the death payouts for those people, and divide the total among the whole group. The larger the group, the more accurately the claims can be predicted (the law of large numbers). Universal life allows policyholders to increase or decrease premiums and change the death benefit. It also accrues interest at market-related rates on premiums over and above insurance charges and expenses. Variable life the annual premium is fixed, but part of it is earmarked for an investment portfolio. The policyholder bears the risk of securities investments, meaning that cash values and death benefits will rise if the underlying investments do well and fall if the investments drop in value. Some insurance companies guarantee a minimum death benefit for an extra premium. When portfolio investments rise substantially, policyholders can use a portion of the increased cash value to buy additional insurance coverage.
3. Both the above answers are correct. But don't get those, or any cash value, life policies! Buy Term and invest the difference! Dave Ramsey, Susie Orman and all the plethora of other financial experts know what they're talking about!