Series 7 practice questioneasyPackaged Products — Variable Life Insurance
Variable life insurance differs from whole life insurance primarily because:
- AVariable life has no cash value component
- BVariable life premiums are always lower than whole life premiums
- CVariable life does not provide a death benefit
- DThe cash value in variable life is invested in separate accounts chosen by the policyholder✓ Correct answer
Explanation
Why D — The cash value in variable life is invested in separate accounts chosen by the policyholder
In variable life insurance, the policyholder directs the cash value into separate accounts (similar to mutual fund sub-accounts), bearing the investment risk. In contrast, whole life insurance invests the cash value in the insurance company's general account at a guaranteed rate. Variable life policies are considered securities and require both an insurance license and a securities registration.
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