A variable life insurance contract is both an insurance policy and a security because of the way the insurance company invests the cash reserves. A variable life policy is a fixed-premium plan that offers the contract holder a minimum death benefit. The holder of a variable life insurance policy may choose how the cash reserves are invested. A variable life policy typically offers stocks, bonds, mutual funds, and other portfolios as investment options. Although the performance of these investments may tend to outperform the performance of more conservative alternatives, the cash value of the policy is not guaranteed. The cash and securities held by the insurance company are invested in the insurance company's separate account and are kept segregated from the insurance company's general account. The separate account is required to register as either an open-end investment or as a UIT under The Investment Company Act of 1940. Representatives who sell these policies must have both a securities license and an insurance license. The insured is covered from the date of issuance to the date of death, as long as the premiums are paid.
A universal life insurance policy, unlike whole and variable life policies, has no scheduled premium payments and a face amount that can be adjusted according to the policyholder's needs. A universal life policy allows the policyholder to decide when premiums are paid and to determine how large those payments will be. Should the insured determine that he or she needs to change the amount of the insurance, the face amount of the policy may be adjusted up or down. The policyholder has no scheduled premium payments, but the insured must make payments frequently enough to support the policy. The policy will stay in effect as long as there is enough cash value in the policy to support the payment of mortality and expense costs. The net premium payments are invested in the insurance company's general account, and a universal life policy is considered an insurance product. Representatives who sell universal life insurance policies must have their insurance licenses.
VARIABLE UNIVERSAL LIFE/ UNIVERSAL VARIABLE LIFE
A variable universal life policy allows the policyholder the ability to determine when premiums are paid and to decide how large those payments are. The net premium is invested in the insurance company's separate account, and the policy's cash value and variable death benefit are determined by the investment experience of the separate account. A variable universal life insurance policy will remain in effect as long as there is enough cash value in the policy to support the cost of insurance. A variable universal life insurance policy may have a minimum guaranteed death benefit but does not have to. Representatives who sell variable universal life polices must have both insurance and securities licenses.