Which of these is the best description of variable life insurance?

Purchased for the secondary purpose of investing More test answers on https://studyhippo.com/personal-financial-lit/

Assets that back the non-guaranteed values of variable life insurance products are held in which account? A. Trust account set up by the insured B. Separate account set up by the insurer C. General account of the insurer D. Money market account

B. Separate account set up by the insurer More test answers on https://studyhippo.com/life-insurance/

The MOST appropriate buyer(s) for a variable life insurance policy is/are: a. A person who requires the discipline of forced savings b. Parents with a modest income who have young children c. A person who wants the assurance of a guaranteed cash value d. A person with an understanding of investments who can tolerate market risk

A person with an understanding of investments who can tolerate market risk Explanation: Similar to a variable annuity, the cash value of a variable life insurance policy increases or decreases in relation to the performance of the separate account. A person who is knowledgeable about investments may be a candidate for variable life insurance because common stock and bonds are the foundation of the policy. As the market values of the securities fluctuate, the cash value changes and is not guaranteed. Therefore, the insured must be able to tolerate market risk. There are other methods by which an investor may achieve forced savings and the product may not be suitable for parents with a modest income who have young children. More test answers on https://studyhippo.com/series-7-practice-exam-9-qa/

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Variable Life Insurance Flashcards, test questions and answers

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What is Variable Life Insurance?

Variable life insurance is a type of permanent life insurance that offers both death benefit protection and an investment component. The policyholder can allocate a portion of their premiums to separate investment accounts, which can include mutual funds, stocks, bonds and other investments. This feature allows the policyholder to potentially achieve higher returns than traditional whole life policies. One of the primary advantages of variable life insurance is that the policyholder has full control over how their money is allocated among the available investment options. This means that they have more potential for increasing their savings faster than with a traditional whole life policy due to higher returns on their investments. Policyholders also have access to more diverse portfolio options and can take advantage of changing market conditions as well as tax-free withdrawals from certain accounts. Another benefit is that variable life insurance policies often come with flexible premiums, allowing the policyholder to adjust or stop payments at any time without penalty or cancellation fees. This makes it easier for people who are on limited incomes or facing financial hardship to continue their coverage without having to worry about paying too much in premiums each month. The main disadvantage of variable life insurance is that it carries a greater risk than other types of permanent life policies due to its investment component. Since these types of policies are subject to market fluctuations, there is no guarantee that your investments will perform well and you could lose a substantial portion or even all of your invested capital depending on market conditions at any given time. Additionally, since these types of policies are not as well regulated as other forms of investments such as mutual funds and stocks, they may be vulnerable to fraud and abuse by unscrupulous individuals seeking financial gain by taking advantage of unsuspecting investors who do not understand how they work fully before investing in them.