Question 73

A life insurance policy with values based on an Insurer's separate account is a variable life insurance policy.

A variable life insurance policy is designed to allow policyholders to allocate a portion of their premiums to a separate account, which can include a variety of investments. This means the cash value and death benefit can fluctuate based on the performance of these underlying investments.

A) variable life insurance policy.

This option is correct because a variable life insurance policy specifically utilizes an insurer's separate account to invest premiums in various investment vehicles. The policyholder can select from these options, leading to potential growth or decline in cash value and death benefits, depending on market performance.

B) adjustable life insurance policy.

An adjustable life insurance policy offers flexibility in premium payments and death benefits but does not involve a separate account for investment. Instead, it allows the policyholder to adjust the coverage amount and premiums, which are typically based on a fixed interest rate rather than investment performance.

C) equity indexed life insurance policy.

Equity indexed life insurance policies are linked to a stock market index, providing the potential for cash value growth based on the performance of that index. However, they do not utilize a separate account in the same way as variable policies do, making this option incorrect.

D) current assumption whole life insurance policy.

Current assumption whole life insurance policies are based on a fixed death benefit and cash value growth determined by the insurer's assumptions about future interest rates and mortality. This type of policy does not invest in a separate account, thus it does not fit the description provided in the question.

Conclusion

The variable life insurance policy is the only option that aligns with the description of a policy that has its values based on an insurer's separate account. Other options do not incorporate a separate account for investment, making them unsuitable in this context. Therefore, option A is the definitive correct answer.