Texas General Lines — Life, Accident, Health and HMOLife InsuranceEasy
A client is seeking a life insurance policy that offers flexible premiums, adjustable death benefits, and the ability to choose how the cash value is invested, with the potential for higher returns but also higher risk. Which type of policy best fits this description?
- AVariable Life
- BUniversal Life
- CWhole Life
- DVariable Universal Life
Show answer & explanationAnswer & explanation
Correct answer: D. Variable Universal Life
Variable Universal Life (VUL) policies combine the flexible premiums and adjustable death benefits of Universal Life with the investment flexibility and risk of Variable Life, allowing the policyowner to direct cash value investments into separate accounts.
Why the other options are wrong
- A. Variable Life allows investment choice in separate accounts but has fixed premiums and a fixed (though potentially variable) death benefit.
- B. Universal Life offers flexible premiums and adjustable death benefits but guarantees minimum interest rates for cash value.
- C. Whole Life has fixed premiums, fixed death benefit, and guaranteed cash value growth.
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 various sub-accounts, similar to mutual funds.
- Flexible premiums and adjustable death benefits.
- Cash value growth is tied to performance of separate accounts.
- Policyowner bears investment risk.
- Requires securities license to sell.
Memory trick: VUL: Variable, Universal, Life - the Ultimate Flexibility