General Account
The insurer's overall investment portfolio backing fixed products such as whole life, where the insurer bears investment risk and guarantees values.
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Practice This Concept
Which statement correctly describes where the investment risk lies under a variable universal life (VUL) insurance policy?
The policyowner bears the investment risk because cash values are placed in separate-account subaccounts that may lose value — A variable universal life policy combines flexible universal life premiums with investment options held in separate accounts. The policyowner directs how the cash value is invested among subaccounts and bears the investment risk: subaccount values can fall, and cash value is not guaranteed. Although some VUL policies offer a minimum guaranteed death benefit, the cash value itself fluctuates with the underlying portfolio performance.
National insurance concept
Where are premium payments under a variable annuity held?
In a separate account that is not part of the insurer's general account — Variable annuity premiums are invested in a separate account of the insurer, which holds the mutual-fund-like subaccounts the owner selects. Because these assets are segregated from the general account, the owner bears the investment risk and the contract's value fluctuates with the subaccounts' performance. The general account, by contrast, supports fixed products and guarantees.
National insurance concept
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