Types of Policies
A variable universal life owner pays only minimal premiums while the selected separate-account options lose value. Monthly cost-of-insurance and expense deductions continue. What is the main near-term risk if the owner makes no change?
Answer and explanation
Answer: C. Variable universal life combines separate-account investment risk with universal-life deductions. If market losses and low premiums leave too little account value to pay ongoing charges, coverage can lapse.Source: National Association of Insurance Commissioners — Life Insurance — Universal Life Insurance > active while cash value covers costs; Variable Universal Life > separate-account earnings not guaranteed
More types of policies questions
- To what external benchmark is the interest crediting rate of an equity-indexed life insurance policy tied?
- Two business owners need one life policy to provide funds when the first of them dies. Which policy trigger is required?
- Two business partners purchase a joint life policy to fund a buy-sell agreement. Partner A dies. What happens to the policy after the death benefit is paid?
- Under a fixed indexed annuity’s basic index-crediting structure, what interest is added for an index term with a negative result?
- Under IRC § 7702 corridor rules, what must an insurer do if cash value growth in a universal life policy threatens to breach the statutory life insurance definition ratio?
- What benchmark rate is used in variable annuity payout calculations to determine whether monthly annuity payment amounts increase or decrease?
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