Life Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
Which statement correctly describes where the investment risk lies under a variable universal life (VUL) insurance policy?
Select an option to reveal the answer and the full 3-part explanation — free, no signup.
Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
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.
Why the other options are wrong
- B) A guaranteed minimum crediting rate describes a fixed or general-account product, not a variable product, which exposes the owner to market losses.
- C) Variable products make no promise that cash value will never decline; market losses can reduce the cash value.
- D) A fixed current interest rate is a feature of fixed or traditional universal life, not of variable universal life.
Memory hook
VUL: you steer the portfolio, so you carry the losses. Variable = value varies with your subaccounts.