Life & Health Insurance Exam (National Portion)Life InsuranceMedium
A 35-year-old client is seeking a life insurance policy that offers flexible premiums, adjustable death benefits, and the ability to access cash values through loans or withdrawals, while also providing a separate investment account. Which of the following policy types best fits these requirements?
- ATerm Life Insurance
- BUniversal Life Insurance
- CVariable Universal Life Insurance
- DWhole Life Insurance
Show answer & explanationAnswer & explanation
Correct answer: C. Variable Universal Life Insurance
Variable Universal Life (VUL) insurance policies combine the flexible premiums and adjustable death benefits of Universal Life with the investment component of Variable Life, allowing policyowners to direct cash value investments into a separate account.
Why the other options are wrong
- A. Term Life provides coverage for a specific period and has no cash value or investment component.
- B. Universal Life offers flexible premiums and adjustable death benefits but typically has a general account for cash value, not a separate investment account directed by the policyowner.
- D. Whole Life offers fixed premiums and guaranteed cash value but lacks flexibility and separate investment accounts.
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, which contains various investment funds.
- Flexible premiums and death benefits.
- Cash value tied to performance of separate investment accounts.
- Policyowner bears investment risk.
- Requires securities license for agents to sell.
Memory trick: Permanent protection, with different ways to FLEX and INVEST.