Question 45

Investment risk is borne by the policyowner in variable universal life insurance.

Variable universal life insurance allows the policyowner to invest the cash value in various investment options, meaning that they assume the investment risk associated with those choices.

A) Guaranteed cash value

Variable universal life insurance does not guarantee cash value; instead, the cash value fluctuates based on the performance of the investments chosen by the policyowner. Therefore, this statement is incorrect.

B) Fixed premium

Variable universal life insurance features flexible premiums, allowing policyowners to adjust their premium payments. This means the statement about fixed premiums is not accurate.

C) Investment risk borne by policyowner

In variable universal life insurance, the policyowner is responsible for investment decisions and bears the associated risks. This is a defining characteristic of this type of insurance, making this statement true.

D) No death benefit flexibility

Variable universal life insurance actually offers death benefit flexibility, allowing policyowners to adjust the death benefit amount. Thus, this statement is incorrect.

Conclusion

The correct answer highlights that in variable universal life insurance, the policyowner carries the investment risk, which is a crucial aspect of this financial product. Other options fail because they misrepresent the features of variable universal life insurance, emphasizing either guarantees that do not exist or characteristics that do not align with its flexible nature.