NASAA Series 65, Uniform Investment Adviser Law ExaminationInvestment Vehicle CharacteristicsMedium
A client is interested in an investment that offers tax-deferred growth, professional management, and the potential for a death benefit, but they are comfortable with market risk and desire flexibility in their investment choices. Which of the following insurance-based products would be most suitable?
- ATerm Life Insurance
- BVariable Universal Life (VUL) Insurance
- CFixed Annuity
- DWhole Life Insurance
Show answer & explanationAnswer & explanation
Correct answer: B. Variable Universal Life (VUL) Insurance
Variable Universal Life (VUL) insurance offers tax-deferred growth, professional management through sub-accounts, a death benefit, and investment flexibility with market risk, aligning with the client's preferences.
Why the other options are wrong
- A. Term life insurance provides a death benefit for a specific period but has no cash value component or investment growth potential.
- C. A fixed annuity offers guaranteed growth and income but lacks investment flexibility and is not primarily a death benefit product.
- D. Whole life insurance offers guaranteed cash value growth and a death benefit but lacks the investment flexibility and market risk exposure the client desires.
Variable Universal Life (VUL) Insurance
A flexible premium, permanent life insurance policy that allows policyholders to allocate cash value to a variety of investment sub-accounts, offering tax-deferred growth and a death benefit.
- Flexible premiums and death benefit
- Cash value invested in sub-accounts (market risk)
- Tax-deferred growth and potential for a death benefit
Memory trick: VUL: Variable, Universal, Life – Very Useful for Long-term investing.