Question

Assets that back the non-guaranteed values of variable life insurance products are held in which account?

A. Trust account set up by the insured
B. Separate account set up by the insurer
C.- General account of the insurer
D. Money market account

Answer 1

The non-guaranteed values of variable life insurance products are backed by assets in a separate account established by the insurer, offering potential for higher market-tied returns but with more risk. Option B is correct.

Step-by-step explanation:

The assets that back the non-guaranteed values of variable life insurance products are held in a separate account set up by the insurer. These assets are invested in various securities, and their performance will directly affect the value of the policy.

Unlike a general account of the insurer, which backs the guaranteed values of traditional life insurance products, the separate account provides a potential for higher returns tied to market performance but also comes with higher risk. It is different from a trust account, which might be set up by an individual, or money market accounts, which are considered to be part of M2 money supply and offer very low risk and liquidity.