CARD Q031
Who generally bears the investment risk of the separate-account choices in variable life insurance?
- The insurer through its general account
- The policyowner
- The investment manager guaranteeing the selected funds
- The insurer and owner sharing each investment loss equally
The policyowner
Separate-account performance can change policy values. Variable products also involve securities regulation; policy guarantees must be read separately.
Why each choice is right or wrong
A. The insurer through its general account
Incorrect. The general account does not absorb the owner’s separate-account investment performance as stated.
B. The policyowner
Correct. Separate-account performance can change policy values. Variable products also involve securities regulation; policy guarantees must be read separately.
C. The investment manager guaranteeing the selected funds
Incorrect. Investment management does not imply a guarantee against market losses.
D. The insurer and owner sharing each investment loss equally
Incorrect. There is no automatic equal-loss-sharing rule between owner and insurer.
Review the related terms
Use these lessons to revisit the concepts and try additional practice questions.