Florida 2-15 Life, Health and Variable Annuity AgentFlorida Laws and Regulations Specific to Life Insurance and AnnuitiesMedium
A Florida resident is considering purchasing a Variable Life insurance policy. Which of the following statements is a key characteristic of Variable Life insurance that distinguishes it from traditional Whole Life insurance?
- AThe cash value offers guaranteed growth and a guaranteed minimum interest rate.
- BIt does not require a prospectus at the time of sale.
- CThe policyowner has the ability to self-direct the investment of the cash value into sub-accounts.
- DThe death benefit is fixed and guaranteed for the life of the insured.
Show answer & explanationAnswer & explanation
Correct answer: C. The policyowner has the ability to self-direct the investment of the cash value into sub-accounts.
Variable Life insurance allows the policyowner to direct the investment of the policy's cash value into various sub-accounts, which can lead to fluctuating cash values and death benefits, unlike traditional Whole Life which offers guaranteed values.
Why the other options are wrong
- A. This describes traditional Whole Life, not Variable Life.
- B. Variable products are considered securities and require a prospectus, unlike traditional Whole Life.
- D. The death benefit in Variable Life can fluctuate based on investment performance, although there may be a guaranteed minimum.
Variable Life Investment Control
A key feature of Variable Life insurance is that the policyowner has control over the investment allocation of the policy's cash value into various sub-accounts.
- Policyowner directs investments
- Cash value invested in sub-accounts
- Cash value and death benefit can fluctuate
- Requires securities license for agent
Memory trick: Variable means 'V'olatile investments, while Whole means 'W'hole lot of guarantees!