Florida 2-15 Life, Health and Variable Annuity AgentGeneral Knowledge of Life InsuranceHard
A client wants to purchase a life insurance policy that offers flexible premiums and a death benefit that can be adjusted to meet changing needs. They are also comfortable with the cash value's growth being tied to the performance of a separate account, which could lead to higher returns but also involves investment risk. Which type of policy are they looking for?
- AWhole Life Insurance
- BVariable Universal Life Insurance
- CVariable Life Insurance
- DUniversal Life Insurance
Show answer & explanationAnswer & explanation
Correct answer: B. Variable Universal Life Insurance
Variable Universal Life (VUL) insurance policies combine the flexible premiums and adjustable death benefits of Universal Life with the investment options and market risk/reward potential of Variable Life, where cash values are invested in separate accounts.
Why the other options are wrong
- A. Whole life has guaranteed premiums and cash value, not flexible or tied to market performance.
- C. Variable life has cash value tied to separate accounts but typically has fixed premiums.
- D. Universal life has flexible premiums and adjustable death benefits, but cash value growth is interest-rate sensitive, not tied to separate accounts with investment risk.
Variable Universal Life (VUL) Insurance
A type of permanent life insurance that offers flexible premiums and an adjustable death benefit, with the cash value invested in a separate account, giving the policyowner control over investment choices and bearing the investment risk.
- Flexible premiums and death benefit.
- Cash value tied to separate account performance (investment risk).
- Potential for higher returns, but no guarantees.
- Requires a securities license to sell.
Memory trick: VUL: Variable investments, Universal flexibility.