Texas General Lines — Life, Accident, Health and HMOLife InsuranceMedium
A client is looking for a life insurance product that offers flexible premium payments, adjustable death benefits, and the ability to choose how the cash value is invested, giving them control over the investment sub-accounts. Which policy type best fits these requirements?
- AUniversal Life
- BVariable Universal Life
- CWhole Life
- DTerm Life
Show answer & explanationAnswer & explanation
Correct answer: B. Variable Universal Life
Variable Universal Life (VUL) policies offer flexible premiums, adjustable death benefits, and allow the policyholder to direct the investment of the cash value into various sub-accounts, providing investment control.
Why the other options are wrong
- A. Universal Life offers flexible premiums and adjustable death benefits, but the insurer manages the cash value investments, not the policyholder.
- C. Whole Life has fixed premiums and death benefits, and the insurer manages the cash value investments.
- D. Term Life policies have no cash value component and therefore no investment options.
Variable Universal Life (VUL)
A flexible premium, adjustable death benefit life insurance policy that allows the policyholder to allocate cash values to a separate account with investment sub-accounts, bearing investment risk.
- Flexible premiums
- Adjustable death benefit
- Policyholder directs investments
- Investment risk borne by policyholder
- Requires securities license to sell
Memory trick: Universal is flexible, but 'Variable' adds the investment control.