Which term describes policies where cash values accumulate based on a stock portfolio without guarantees of performance and are determined by the value of securities backing it?

Which term describes policies where cash values accumulate based on a stock portfolio without guarantees of performance and are determined by the value of securities backing it?

• A. Fixed life insurance
• B. Variable life insurance
• C. Group life insurance
• D. Solicitation of insurance

Answer: (B)

This describes variable life insurance. In this type of policy, part of the premium funds a cash value that is invested in separate accounts, often composed of stocks and other securities. Because the cash value is tied to the performance of those investments, there are no guarantees about how much cash value will accumulate—the value goes up or down based on market performance and the securities backing it. The death benefit can also fluctuate with the cash value, reflecting the investment results, though some contracts offer a minimum death benefit. In contrast, fixed life insurance guarantees a minimum cash value growth at a set rate, with the insurer bearing the investment risk. Group life generally lacks an investment component and provides coverage for a group rather than a cash-value vehicle. Solicitation of insurance is not a policy type at all.

This describes variable life insurance. In this type of policy, part of the premium funds a cash value that is invested in separate accounts, often composed of stocks and other securities. Because the cash value is tied to the performance of those investments, there are no guarantees about how much cash value will accumulate—the value goes up or down based on market performance and the securities backing it. The death benefit can also fluctuate with the cash value, reflecting the investment results, though some contracts offer a minimum death benefit.

In contrast, fixed life insurance guarantees a minimum cash value growth at a set rate, with the insurer bearing the investment risk. Group life generally lacks an investment component and provides coverage for a group rather than a cash-value vehicle. Solicitation of insurance is not a policy type at all.