Florida 2-15 Life, Health and Variable Annuity AgentFlorida Laws and Regulations Specific to Life Insurance and AnnuitiesHard
A Florida resident is considering a life insurance policy that offers a guaranteed minimum death benefit, but whose cash value and actual death benefit can fluctuate based on the performance of a separate account. Which type of policy is this?
- ATerm Life Insurance
- BUniversal Life Insurance
- CWhole Life Insurance
- DVariable Universal Life Insurance
Show answer & explanationAnswer & explanation
Correct answer: D. Variable Universal Life Insurance
Variable Universal Life (VUL) combines features of Universal Life (flexible premiums, adjustable death benefit) with Variable Life (policyowner-directed investments in a separate account, fluctuating cash value and death benefit, but usually with a guaranteed minimum death benefit).
Why the other options are wrong
- A. Term life has no cash value and a fixed death benefit.
- B. Universal life has flexible premiums and adjustable death benefit, but cash value grows at an interest rate, not through separate account investments.
- C. Whole life has guaranteed cash value growth and a fixed death benefit.
Variable Universal Life (VUL)
A flexible premium, adjustable death benefit life insurance policy that allows the policyowner to direct the investment of the cash value into a separate account, leading to fluctuating cash values and death benefits, often with a guaranteed minimum death benefit.
- Flexible premiums
- Adjustable death benefit
- Cash value invested in separate account
- Cash value and death benefit fluctuate
- Guaranteed minimum death benefit (usually)
- Requires securities license for agent
Memory trick: Whole is fixed, Universal is flexible, Variable is investor-driven, VUL is ALL of it!