Question

Which of the following statements are TRUE concerning variable life separate accounts?

I. A favorable performance increases the death benefit.
II. Investments may include common stock, money-market instruments, and bonds.
III. Changes in the investment policy can be made at the discretion of the investment managers.
IV. Account assets are technically owned by the insurance company and are carried on the insurance company's financial statements.

a. I and II only
b. II and III only
c. I, II, and IV only
d. I, II, III, and IV

Answer 1

Variable life separate accounts offer investment options with favorable performance increasing the death benefit, the ability to invest in various securities, discretionary changes in the investment policy, and ownership of the account assets by the insurance company.

Step-by-step explanation:

Variable life separate accounts are a type of investment option offered by insurance companies within a variable life insurance policy. Regarding the statements, the following are TRUE:

1. A favorable performance increases the death benefit: When the investments in the separate account perform well, the cash value of the policy increases, which in turn increases the death benefit the beneficiary would receive upon the insured's death.
2. Investments may include common stock, money-market instruments, and bonds: Variable life separate accounts offer a range of investment options, including these types of securities, allowing policyholders to potentially earn higher returns.
3. Changes in the investment policy can be made at the discretion of the investment managers: Investment managers have the authority to make changes to the investment policy of the separate accounts based on their assessment of market conditions and investment strategies.
4. Account assets are technically owned by the insurance company and are carried on the insurance company's financial statements: Although policyholders have the right to allocate their premiums among various investment options, the assets in the separate accounts are owned by the insurance company, and they are reflected in the company's financial statements.