L&HGeorgiahard
A Georgia variable life policyowner sees her cash value decline sharply due to poor sub-account performance. Which statement most accurately describes the legal allocation of risk and the insurer's guarantee under a Georgia variable life contract?
AThe insurer guarantees both the cash value and the death benefit against any investment loss
BThe OCISF guarantees variable life cash values through GLHIGA up to $300,000
CSub-account losses must be reimbursed by the producer's broker-dealer if performance falls below illustrated rates
The policyowner bears the investment risk on cash value and on variable death benefit components held in the separate account; only a minimum stated death benefit is typically guaranteed by the insurer's general account
Why this is the answer
Variable life insurance places investment risk on the policyowner. Cash value and any variable portion of the death benefit fluctuate with the performance of selected separate-account sub-accounts. Under Georgia's variable life rule, Ga. Comp. R. & Regs. 120-2-32, the insurer typically guarantees only a minimum stated death benefit through its general account; the variable upside (and downside) belong to the policyowner. Neither OCISF nor GLHIGA backstops sub-account market losses, and broker-dealers do not insure investment results.
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