Which description best defines Variable Life insurance?

Which description best defines Variable Life insurance?

• A. A fixed premium Whole Life policy under which the death benefit and/or cash value fluctuates reflecting the investment performance of the underlying separate account.
• B. A Term policy with level premiums.
• C. A Universal Life policy with flexible premiums.
• D. A policy that guarantees cash value and death benefit do not change.

Answer: (A)

Variable Life insurance blends permanent protection with an investment feature. The premiums are fixed, but the policy’s cash value and the death benefit can rise or fall based on how the money in the separate accounts performs, much like an investment portfolio. This is why the description that matches best is a fixed-premium policy where the death benefit and/or cash value fluctuates with the investment performance of the separate account. Term policies with level premiums don’t build cash value, so they don’t fit. Universal Life has flexible premiums, which isn’t the case here. And a policy that guarantees cash value and death benefit never change describes a non-fluctuating traditional whole life, not variable life where values move with investments.

Variable Life insurance blends permanent protection with an investment feature. The premiums are fixed, but the policy’s cash value and the death benefit can rise or fall based on how the money in the separate accounts performs, much like an investment portfolio. This is why the description that matches best is a fixed-premium policy where the death benefit and/or cash value fluctuates with the investment performance of the separate account.

Term policies with level premiums don’t build cash value, so they don’t fit. Universal Life has flexible premiums, which isn’t the case here. And a policy that guarantees cash value and death benefit never change describes a non-fluctuating traditional whole life, not variable life where values move with investments.