Which statement describes variable life insurance?

Which statement describes variable life insurance?

• A. A permanent policy with cash values held in a separate account, with investment risk borne by the policyowner, and a possible guaranteed minimum death benefit if premiums are maintained.
• B. A term policy with no cash value and fixed premiums.
• C. A policy where cash values are held in the general account and guaranteed by insurer.
• D. A policy with guaranteed fixed returns on cash value, independent of market performance.

Answer: (A)

Variable life insurance combines permanent protection with cash values that are invested in separate accounts. The policy provides lifelong coverage, but the cash value isn’t guaranteed and can fluctuate with the performance of the chosen investments. The policyowner bears the investment risk, and many contracts also offer a guaranteed minimum death benefit as long as premiums are paid. This description fits the statement that describes a permanent policy with cash values held in a separate account, with investment risk borne by the policyowner, and a possible guaranteed minimum death benefit if premiums are maintained. The other descriptions correspond to term insurance (no cash value), cash values kept in the insurer’s general account with guarantees, or cash values with guaranteed fixed returns regardless of market performance, which are not characteristic of variable life.

Variable life insurance combines permanent protection with cash values that are invested in separate accounts. The policy provides lifelong coverage, but the cash value isn’t guaranteed and can fluctuate with the performance of the chosen investments. The policyowner bears the investment risk, and many contracts also offer a guaranteed minimum death benefit as long as premiums are paid. This description fits the statement that describes a permanent policy with cash values held in a separate account, with investment risk borne by the policyowner, and a possible guaranteed minimum death benefit if premiums are maintained. The other descriptions correspond to term insurance (no cash value), cash values kept in the insurer’s general account with guarantees, or cash values with guaranteed fixed returns regardless of market performance, which are not characteristic of variable life.