What is the variable death benefit in a fixed-premium variable life policy?

What is the variable death benefit in a fixed-premium variable life policy?

• A. An additional death benefit that may result from positive performance of the separate account, paid to the beneficiary in addition to the minimum guaranteed death benefit.
• B. The guaranteed cash value at death.
• C. A death benefit that decreases if the market performs poorly.
• D. A rider that allows withdrawal of cash value at death.

Answer: (A)

In a fixed-premium variable life policy, part of the death benefit is guaranteed, and part can rise based on how the policy’s separate account performs. The variable death benefit is that extra amount that may be added to the beneficiary on top of the guaranteed minimum if the separate account earns positive investment returns. If performance is strong, the death benefit increases; if performance is poor, you still have the minimum guaranteed amount, but the extra portion may not apply. This is why the correct description emphasizes an additional death benefit that results from favorable performance of the separate account, paid in addition to the guaranteed minimum. The other options refer to the cash value, a decrease due to market performance, or a withdrawal rider, which do not capture the idea of a performance-based add-on to the death benefit.

In a fixed-premium variable life policy, part of the death benefit is guaranteed, and part can rise based on how the policy’s separate account performs. The variable death benefit is that extra amount that may be added to the beneficiary on top of the guaranteed minimum if the separate account earns positive investment returns. If performance is strong, the death benefit increases; if performance is poor, you still have the minimum guaranteed amount, but the extra portion may not apply. This is why the correct description emphasizes an additional death benefit that results from favorable performance of the separate account, paid in addition to the guaranteed minimum. The other options refer to the cash value, a decrease due to market performance, or a withdrawal rider, which do not capture the idea of a performance-based add-on to the death benefit.