Products & Their RisksQuestion 83 of 398
A variable life insurance policy is considered a security because:
a.It guarantees a fixed cash value regardless of markets
b.Its death benefit can never change
c.It is issued only by federally chartered banks
d.Its cash value is invested in separate account subaccounts, so it fluctuates with investment performance
Explanation
Variable life insurance places policy cash values in separate account subaccounts of securities, so the cash value and potentially the death benefit vary with investment performance and the policyholder bears investment risk. Because of this securities exposure, variable life is regulated as both insurance and a security, requiring a prospectus and securities registration to sell.
Law Reference: Investment Company Act of 1940Practice all 398 questions free — no signup required.
Related questions on this topic
- A 68-year-old retiree wants guaranteed lifetime income and cannot tolerate any loss of principal. Which product is most suitable?
- During the pay-in (accumulation) phase of a variable annuity, an investor's contributions purchase:
- Which statement about the two phases of an annuity is correct?
- The buyer (holder) of a call option has the right to:
- An investor who buys a put option is generally:
- The writer (seller) of a call option is obligated to:
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