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A traditional Variable Life policy is issued with a $200,000 face amount. Subaccount performance is poor over a decade. Which of the following is correct?
The death benefit will not fall below the $200,000 minimum guaranteed face amount as long as scheduled premiums are paid; cash value is NOT guaranteed
BThe death benefit can fall below the $200,000 minimum guaranteed face amount whenever subaccount values decline, since the face follows separate-account performance over time
CBoth the death benefit and the cash value carry a contractual minimum guarantee equal to the cumulative total of all premiums paid into the contract
DThe insurer must replace any lost subaccount cash value out of its own general account at the close of each policy year to keep the value level
Why this is the answer
Traditional Variable Life is a fixed-premium permanent contract where cash values are invested in separate-account subaccounts selected by the policyowner. Because premiums are scheduled and the insurer reserves to a minimum face amount, the death benefit cannot fall below the guaranteed face as long as premiums are paid. Cash value, however, fluctuates fully with subaccount performance and has no floor. Variable Life is a security AND insurance — producers need a life license PLUS FINRA registration (Series 6 or 7 plus state securities license).
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