Inv - Insurance based products (3)
Marianne has a fixed premium variable life policy in which the separate account has been performing extremely well, and the face value has been increasing as a result of the investment performance. However, recently the separate account performance has been negative. If this continues, the face value could decrease: A)to the original face value. B)to 0. C)to 25% of the original face value. D)to 50% of the original face value.
A)to the original face value. The face value in an insurance policy is the death benefit. In a variable life policy, the face value will fluctuate with the separate account's performance, but it will never decrease below the original minimum face value.
Flexible premium payments are a feature of: A)variable life. B)universal variable life. C)term life. D)whole life.
B)universal variable life. Only universal and universal variable life policies have flexible premium payments.
A customer in his twenties, who is not risk averse, is in the market for life insurance. His main worry is that what looks like a generous death benefit today may not be sufficient for a beneficiary 40 or 50 years from now. A registered representative might consider recommending: A)term life insurance. B)variable life insurance. C)an aggressive, long-term strategy of investment in small-cap stocks. D)whole life insurance with the option of purchasing additional coverage.
B)variable life insurance. Variable life insurance has the advantage of offering possible inflation protection for the death benefit. The insured assumes investment risk for this benefit, but pays a fixed scheduled premium for the life of his contract.
The death benefit of a variable life policy must be calculated at least: A)monthly. B)weekly. C)semiannually. D)annually.
D)annually The death benefit must be calculated annually and the cash value monthly.
For a given amount of principal, which annuity option would produce the largest monthly income stream? A)Straight life. B)Life with term certain. C)Joint and 100% survivor. D)Joint and 50% survivor.
A)Straight life. A)Straight life.
Which of the following types of life insurance has premiums that increase each time the policy is renewed, and no cash value buildup? A)Term. B)Variable life. C)Universal life. D)Ordinary whole life.
A)Term. A term policy provides life insurance only with no savings element. Upon renewal, the rates are higher as you age.
A 64 year-old woman wishes to withdraw funds from her non-qualified single premium deferred variable annuity purchased a number of years ago. The withdrawal would be: A)taxed as ordinary income. B)taxed as capital gain. C)subject to the required minimum distribution rules. D)subject to a 10% penalty unless annuitized.
A)taxed as ordinary income. Yes, I know that only the portion of the withdrawal that exceeds the cost basis is subject to tax, but what else are you going to pick here? Sometimes you have to go with the best choice, even if it isn't the most accurate.
Which of the following is guaranteed by a variable life policy? A)Policy loans after the policy has been in effect for at least 24 months. B)Minimum separate account performance. C)Cash value. D)Minimum death benefit.
D)Minimum death benefit. A variable life policy has a minimum guaranteed death benefit, but there is no minimum guaranteed cash value. There is no performance guarantee on separate accounts and policy loans are required after the policy has been in effect for at least 3 years (36 months).
A client needs funds for an unexpected medical emergency. If the client takes out a loan against the cash value of his life insurance policy and does not pay it back, the insurance company can do which of the following? A)Reduce the cash value at the next anniversary B)Cancel the policy C)Increase the premium amortized over the life of the policy D)Reduce the death benefit when the client dies
D)Reduce the death benefit when the client dies Unpaid cash value loans reduce the death benefit.
Which of the following is designed primarily as a retirement vehicle to help protect contract owners from a decline in purchasing power? A)Retirement income life insurance. B)Life paid-up at age 65 life insurance. C)Flexible premium fixed annuity. D)Variable annuities.
D)Variable annuities. The trade-off with lack of guarantees is the potential to keep pace with inflation.
Which of the following is considered to be an advantage of annuitization? A)Payments under a variable annuity could be reduced if there is a declining market. B)Once annuitized, the client's draw from the annuity is limited to the annuity payment. C)A fixed, level periodic payment tends to lose buying power over time due to inflation. D)It guarantees income that will last for the client's lifetime.
D)It guarantees income that will last for the client's lifetime. Annuities offer a guarantee of income that will last for a client's lifetime. The other statements, while true, represent disadvantages of annuitization. Annuitization does limit liquidity and flexibility.
An individual has borrowed $500,000 for a business loan. The loan agreement requires payment in one lump sum at the end of 7 years and stipulates that protection be provided in the form of a life insurance policy on the individual. Which type of insurance would probably be most appropriate in this situation? A)Variable universal life B)Level term C)Decreasing term D)Whole life
B)Level term Term insurance is frequently referred to as temporary insurance, because it is often used to cover a specific need. In this case, because the payback is in a lump sum, level term is most appropriate. If it were being amortized over the seven years (similar to a mortgage), then perhaps the decreasing term would be the best choice.
Variable annuities: A)may invest only in money market mutual funds. B)may have 20 or more sub-account investment options. C)generally provide more security of principal than fixed annuities. D)provide a guaranteed minimum annuity payout.
B)may have 20 or more sub-account investment options. Some variable annuity separate accounts have 50 or more sub-accounts to choose from. There are no guarantees as far as the amount of payout.
A policy loan provision must be offered by the insurer after three years, allowing the variable life policy contract holder to borrow at least what percentage of cash value? A)75% B)90% C)100% D)125%
A)75% The minimum that must be available in a VLI contract after three years is 75% of cash value.
A 35 year-old client indicates that he needs $500,000 of life insurance coverage for the next 20 years. The lowest out-of-pocket cost would be if he purchased a A)20-year level term policy B)variable annuity with an extended death benefit C)20-pay life policy D)whole life policy
A)20-year level term policy In almost all circumstances, certainly for short-to-immediate time periods, term life will be the least expensive form of insurance. A 20-pay life is a permanent policy where the premiums are paid in a 20-year period rather than until death. Variable annuities are not life insurance policies even though they are issued by life insurance companies.
All of the following statements regarding universal life insurance are correct EXCEPT: A)premiums are fixed for the life of the policy. B)offers the policyowner exceptional flexibility in adjusting the premiums, cash value, and death benefit. C)there are two death benefit options. D)may include a minimum guaranteed interest rate.
A)premiums are fixed for the life of the policy. The single most distinguishing characteristic of universal life is the fact that premiums are flexible and not fixed.
The main benefit that variable life insurance has over whole life insurance is: A)a lower sales charge. B)the potential for a higher cash value and death benefit. C)an adjustable premium. D)the availability of policy loans.
B)the potential for a higher cash value and death benefit. Premiums of variable life insurance policyholders are invested in the insurer's separate account. This allows the policyholder the opportunity (though there are no guarantees) to enjoy significant returns and substantially higher cash values than are obtainable through a whole life policy.
All of the following are advantages of universal life insurance EXCEPT: A)the policy is guaranteed never to lapse. B)when the cash value is sufficient, no premium payment is required. C)ability to change death benefit amount. D)ability to adjust the amount of premium payments.
A)the policy is guaranteed never to lapse. A universal life policy may lapse if the accumulation fund drops below a specified level and an additional premium is not paid.
Which of the following is a possible advantage of scheduled premium variable life insurance over whole life insurance? A)Less risk in the underlying investment instruments B)Greater guaranteed cash value C)Flexibility of premium payments D)Possible inflation protection for the death benefit
D)Possible inflation protection for the death benefit Scheduled (fixed) premium variable life has fixed, not flexible, premium payments. The distinguishing factor is the variable death benefit. The insured assumes more risk, not less, in exchange for the possibility that the death benefit will provide protection from inflation.
Which of the following would be a difference between a universal life insurance policy and a scheduled premium variable life insurance policy? A)There is a minimum guaranteed return on the universal life while there is no guaranteed return on the variable. B)There is a greater choice of separate account sub-accounts in the universal life policy. C)The universal life policy will generally outperform the variable life policy during a period of falling interest rates and rising stock prices. D)There is a minimum guaranteed death benefit in the variable life while no such minimum applies to a universal life policy.
D)There is a minimum guaranteed death benefit in the variable life while no such minimum applies to a universal life policy. Universal life, including UVL, does not have a minimum guaranteed death benefit. There is no choice of separate account sub-accounts for universal life. Universal life is designed to benefit from periods of high interest rates, not falling ones.
Which of the following statements is TRUE concerning variable life separate account valuation? A)Unit values are computed monthly and cash values are computed daily. B)Unit values are computed weekly and cash values are computed monthly. C)Unit values are computed monthly and cash values are computed weekly. D)Unit values are computed daily and cash values are computed monthly.
D)Unit values are computed daily and cash values are computed monthly. Unit values are computed each day. Policy cash values are a monthly computation.
A client who purchased a variable life insurance policy 15 months ago has suffered a stroke. In addition, he has developed adult onset diabetes. When receiving treatment for the stroke, he was diagnosed with lung cancer. He has decided to convert his variable policy to a whole life policy. Which of the following statements is CORRECT? He will not be able to convert to a whole life insurance policy because his health has deteriorated to such a severe level. The new policy will bear the same issue date and age as the original policy. The face amount must remain the same. The premium will be rated as his health has taken a marked turn for the worse. A)II and III B)II, III and IV C)I, II, III and IV D)I and IV
A)II and III Variable life insurance offers a unique conversion policy. Anytime during the first 24 months after policy issue, the policy may be exchanged for a whole life policy (or some similar form of permanent insurance if the company doesn't offer whole life) using the age and medical condition at issue regardless of the insured's current health. However, the face amount cannot be changed from its original amount.
Among the unique characteristics of a universal life insurance policy is A)early termination could lead to surrender charges B)death benefits may increase above the initial face amount C)that policyowners may borrow against the cash value D)the policy may be overfunded
D)the policy may be overfunded Only with universal life is the policyowner permitted to pay in an amount in excess of the stated premiums (one of the reasons universal life is known as flexible premium life). The IRS puts limits on the amount of the overfunding before certain tax advantages are lost, but that is beyond the scope of the exam. Not only universal life, but variable life as well, has the possibility of increased death benefits. In fact, some whole life policies allow policy dividends to be used to increase the death benefit. Permanent forms of insurance policies, including whole life, universal life, and variable life, permit loans against the cash value. Many forms of life insurance have surrender charges for early termination.
Current IRS regulations permit an unlimited contribution to which of the following tax-deferred plans? A)Annuity B)SEP-IRA C)Roth IRA D)401(k)
A)Annuity Nonqualified annuities offer tax deferral similar to that of qualified retirement plans. However, unlike qualified plans and IRAs, the IRS places no limitation on the amount that may be contributed.
A popular vehicle for saving for retirement is the variable annuity. An agent explaining the benefits of this product would probably be in violation of the NASAA Statement of Policy on Dishonest and Unethical Business Practices of Broker-Dealers and Agents by claiming that variable annuities offer: A)lower overall expenses than a mutual fund with similar investment objectives. B)tax deferral on earnings until withdrawn from the account. C)the choice of a large number different sub-accounts with varying objectives. D)the ability to transfer funds between sub-accounts without incurring a tax liability under IRS Code section 1035.
A)lower overall expenses than a mutual fund with similar investment objectives. In general, variable annuity expenses are higher than those of a mutual fund with similar objectives. That doesn't mean the fund is good and the VA bad, it is that there are guarantees and other features offered by the VA that a fund does not have and they have to be paid for.
You are meeting with a client and the discussion turns to life insurance. When asked about annual renewable term insurance, you would reply that it has A)a fixed premium, level face amount, no cash value B)a fixed premium, reducing face amount, little cash value C)an increasing premium, increasing face amount, no cash value D)an increasing premium, level face amount, no cash value
D)an increasing premium, level face amount, no cash value Annual renewable term life insurance has a level face amount, no cash value and, because the premium is based on the attained age, the premium increases each year on the renewal date.
According to federal law, an insurance company under the provisions of the Investment Company Act of 1940 must allow a variable life policyholder the option to convert the policy into a whole life contract for a period of: A)12 months. B)24 months. C)18 months. D)45 days.
B)24 months. Although state law may allow for periods longer than 24 months, federal law requires a two-year conversion privilege.
A thirty-five year-old client purchases a variable life insurance policy. Under current regulations, the maximum sales charge permitted over the life of the policy is: A)8.5% per premium payment. B)9%. C)8.5% of total premiums over the life of the plan. D)9% per premium payment.
B)9%. A variable life insurance plan may charge a maximum sales charge of 9% over a period not to exceed 20 years.
Which of these are TRUE regarding a life settlement contract? Premiums will be paid by the contract owner. Premiums will be paid by the insured. Proceeds will be paid upon the death of the contract owner. Proceeds will be paid upon the death of the insured. A)II and III B)I and IV C)I and III D)II and IV
B)I and IV A life settlement is the secondary sale of a life insurance policy. The buyer (the new owner) is responsible for paying the premiums and, upon the death of the insured, will receive the death benefit.
Which of the following best describes the death benefit provision of a variable annuity? A)If death should occur prior to age 59½, the 10% early withdrawal penalty does not apply. B)Upon death, the beneficiary has a choice of settlement options. C)The principal amount at death is the greater of the total of premium payments or the current market value. D)Upon death, the proceeds pass to the beneficiary free of federal income tax.
C)The principal amount at death is the greater of the total of premium payments or the current market value. The death benefit insures that the investor will never receive back less than the original amount contributed to the account. Unlike life insurance proceeds, with annuities, anything above the cost basis is taxed as ordinary income.
A policy owner could surrender a whole life insurance policy and choose from all the following EXCEPT A)taking the cash value B)purchasing a reduced coverage whole life policy C)purchasing an extended term life policy D)transferring the policy to another person
D)transferring the policy to another person Life insurance policies are non-transferrable. Upon surrender, the cash value may be taken or used to purchase extended term insurance or a reduced value, paid up, whole life policy.
An individual purchasing a flexible premium variable life contract should know which of the following? Timing and amount of premiums generally are discretionary. The death benefit will generally be higher than that of a comparable whole life policy. The face amount is fixed at the beginning of the contract. The performance of the separate account directly affects the policy's cash value. A)I and IV. B)II and III. C)II and IV. D)I and III.
A)I and IV. A flexible premium policy allows the insured to determine the amount and timing of premium payments, provided minimums are met. Depending on the policy, the face amount (death benefit) is recalculated each year. It is intended that the death benefit receive some inflation protection, but this cannot be guaranteed. If separate account performance causes the cash value to drop below an amount necessary to maintain the policy in force, the policy lapses unless the requisite amount is received within 31 days.
Which of the following describe differences between variable and universal variable life insurance? Variable life insurance has a minimum guaranteed death benefit, whereas universal variable life insurance does not. Universal variable life insurance typically provides a higher death benefit than variable life insurance. Variable life insurance provides no inflation protection for the death benefit, whereas universal variable life insurance does. Variable life insurance requires scheduled premium payments, whereas universal variable life insurance permits flexible premium payments. A)II and III. B)I and IV. C)I and II. D)III and IV.
B)I and IV. Variable life insurance provides a minimum guaranteed death benefit because some of the premium goes into the general account and some goes into a separate account. With universal variable life insurance, the entire premium goes into a separate account, so that no guaranteed death benefit is provided, beyond a very small amount designed to meet funeral expenses. Variable life has a scheduled premium payment for the life of the contract. Universal variable life is far more flexible, though there are minimum payments that must be made. Both provide inflation protection for the death benefit.
A fixed-premium variable life insurance contract offers a: guaranteed maximum death benefit. guaranteed minimum death benefit. guaranteed cash value. cash value that fluctuates according to the contract's performance. A)I and IV. B)II and IV. C)II and III. D)I and III.
B)II and IV. A fixed-premium variable life contract offers a minimum death benefit and a variable death benefit over the minimum. Its cash value fluctuates with the performance of the separate account.
All of the following statements regarding scheduled premium variable life insurance are correct EXCEPT: A)once selected, the policy owner may change payment modes. B)better than anticipated results in the separate account could lead to a reduction in annual premium. C)premiums are determined based upon age and sex of the insured. D)the policy owner has the right to change the selection of sub-accounts
B)better than anticipated results in the separate account could lead to a reduction in annual premium. Scheduled (fixed) premium variable life premiums are fixed. It is universal life that has flexible premiums.
Under the exchange provision, within the first 24 months, a variable life policy may be converted into a A)variable annuity B)permanent form of life insurance policy C)mutual fund shares D)term insurance policy
B)permanent form of life insurance policy The variable life exchange provision allows a policyholder to convert the variable policy into a permanent form of life insurance policy within the first 24 months of variable policy ownership. The insurance company must use the initial contract date and can not require proof of insurability.
A life insurance policy where the premium increases each time the policy is renewed while the face amount remains level is A)increasing term B)renewable level term C)decreasing term D)variable universal
B)renewable level term Level term insurance offers a fixed face amount over the life of the policy. If the policy is renewable, the owner has the ability to renew it for that same face amount and the new term, but at new, higher premiums as the insured's age increases.
A client purchased an index annuity from you three years ago and made an initial deposit of $100,000. The contract calls for a 90% participation rate with a 15% cap. The index had a return of + 20% in the first year, - 5% the second year, and +10% the third year. The investor's current value is approximately A)$128,620 B)$126,500 C)$125,350 D)$117,829
C)$125,350 In the first year, the index gained 20%. With a 90% participation rate, the investor might have earned 18%, but was limited by the 15% cap. So, after one year the value was $115,000. In the second year, the index lost money. However, with an index annuity there are never any reductions in a down market so the account remained at $115,000. In the third year, the investor received 90% of the 10% growth and that increased the account value to $125,350. This resulted in an overall gain of 25.35%, or an average return of almost 8.5% per year.
You have a 37-year-old client whose wife has just given birth to triplets. Because of the added responsibilities, he wants to maximize the amount of life insurance he can acquire. Which of the following types of insurance will give him the greatest amount of coverage for the lowest initial premium? A)Variable life B)Whole life C)Annual renewable term D)Universal life
C)Annual renewable term At any given age, term insurance always carries the lowest premium and, of the term policies available, annual renewable term always has the lowest initial premium. Of course, because the premium tends to increase each year the policy is renewed, at older ages it can become unaffordable. But, remember, this question is only asking about initial cost.
Your client has $50,000 to invest. His objective is monthly income that he can receive after he retires to supplement his small pension and Social Security benefits. As part of his profile, he stresses that he has had uncomfortable experiences in the past with the stock market and is not inclined to invest in anything that is based on stock market performance—and he would opt for principal protection instead. Based on the client's profile, which of the following would be the best recommendation? A)Exchange-traded fund (ETF) or exchange-traded note (ETN) B)Variable annuity C)Fixed annuity D)Mutual fund portfolio consisting of blue chip stocks
C)Fixed annuity Though its stated return might not be as high as the other choice's potential returns, only a fixed annuity fits the objective and risk-averse traits of this client. VAs, blue chip mutual fund portfolios, ETFs, and ETNs are all tied to market performance in some way and have risk characteristics that would not align in terms of suitability for this client.
Which of these features are common to both variable annuities and scheduled premium variable life insurance? Income earned in the separate account is tax deferred. Separate account performance below the AIR causes a reduction in cash value. Fixed contributions are required. Contract owners have voting rights. A)III and IV. B)II and III. C)I and IV. D)I and II.
C)I and IV. All variable products offer tax deferral of earnings in the separate account. Unit holders of a variable annuity vote on the basis of the number of units they own; holders of variable life insurance receive one vote for each $100 of cash value. With variable life insurance, AIR applies only to the death benefit, not to cash value.
niversal variable life policies: have investment risk that is assumed by the investor. do not have a separate account. guarantee the minimum face amount with the opportunity for increases based upon the performance of the separate account. are purchased primarily for their insurance features. A)III and IV. B)I and II. C)I and IV. D)II and III.
C)I and IV. Universal variable life policies are insurance company products that should be purchased primarily for the insurance features they offer rather than as an investment. Because they have a separate account, the investor assumes the investment risk. Unlike scheduled premium variable life, flexible premium (universal) variable life does not guarantee a minimum death benefit equal to the face amount of the policy.
In a scheduled premium variable life insurance policy, all of the following are guaranteed EXCEPT A)a minimum death benefit B)the ability to borrow at least 75% of the cash value after the policy has been in force at least 3 years C)the right to exchange the policy for a permanent form of insurance, regardless of health, within the first 24 months D)a minimum cash value
D)a minimum cash value In a variable life insurance policy, a minimum death benefit is guaranteed, but no cash value is guaranteed. There is a contract exchange privilege during the first 24 months allowing the conversion of the variable policy to a comparable form of permanent insurance and the 75% cash value loan minimum applies after the third year of coverage.
Which of the following statements regarding non-qualified annuities is CORRECT? A)The exclusion ratio applies to accumulation units only. B)Since only insurance companies issue variable annuities, they are not considered securities. C)It is possible to start distributions from an annuity before age 59 ½ without incurring tax penalties. D)Because taxes on earnings are deferred, all withdrawal proceeds will be subject to income tax when received.
C)It is possible to start distributions from an annuity before age 59 ½ without incurring tax penalties. Non-qualified annuities, fixed or variable, are those where contributions are made with after-tax dollars. Withdrawals due to death or disability or taking substantially equal annuity distributions over the life of the insured can begin before age 59 ½ without being subject to a tax penalty. The exclusion ratio only applies during the payout period. Even though taxes on earnings are deferred, that portion of the withdrawal that represents a return of principal on a non-qualified annuity, is not subject to tax or penalty.
A 75-year-old customer asks if it is possible to sell his $500,000 variable life insurance policy to a party other than the insurance company that issued the policy. If a sale occurs, known as a life settlement, which of the following would be a violation of industry rules? A)Disclosing that the buyer becomes responsible for all premiums while the insured is living B)Not requiring the insured to pass a physical exam prior to the sale C)Quoting the price using an exclusive buyer that handles all the firm's life settlements D)Requiring the customer to relinquish all ownership rights to the policy
C)Quoting the price using an exclusive buyer that handles all the firm's life settlements Because of the limited secondary market for life settlements, any firm that engages in these transactions should obtain several bids to ensure the customer receives a fair price for her policy.
Which of the following is indicative of the primary difference between variable life insurance and straight whole life insurance? A)Cost of the insurance. B)Amount of insurance that can be issued. C)Way in which the cash values are invested. D)Tax treatment of the death proceeds.
C)Way in which the cash values are invested. Variable life insurance allows the policyowner to decide how the cash value is invested through a number of sub-accounts.
A client needs emergency cash for 30 days. All of the following are acceptable sources EXCEPT: A)using credit card access checks. B)taking a premature distribution from an IRA. C)term life insurance. D)margin loan from a broker-dealer.
C)term life insurance. Term life insurance has no cash value. Withdrawals from an IRA incur no tax or penalty if 100% of the funds are replaced within 60 days.
One of your clients owns an equity index annuity with a participation rate of 85% and a cap of 11%. During the past 12 months, the index used in the computation showed a gain of 12.80%. As a result, the client's account value was credited with a gain of A)9.35% B)11.00% C)12.80% D)10.88%
D)10.88% The client is entitled to participate in 85% of the 12.80% gain with a maximum (capped) limit of 11%. Computing 85% of 12.80% gives us 10.88% which is below the 11% cap.
Which of the following statements concerning universal life insurance are CORRECT? Universal life has flexible premiums. Universal life is based on the assumption that level annual premiums are to be paid throughout the insured's life. The death benefit can fluctuate, but never below the guaranteed minimum face amount. Cash values can fluctuate and may even fall to zero. A)II and III. B)III and IV. C)I and II. D)I and IV.
D)I and IV. Universal life features flexible premiums that add to the cash value account although there are no guarantees and the cash value can disappear if insufficient premiums are paid. There is no guaranteed minimum death benefit as there is with fixed (scheduled) premium variable life. The assumption that level annual premiums are to be paid throughout the insured's life is associated only with ordinary whole life and scheduled premium variable life policies.
One of the features of an index annuity is the ability for the principal value to increase based on the performance of the specified index. Which of the following is not used as a method to compute the amount of interest to be credited to the account? A)Point-to-point B)Annual reset C)High-water mark D)Participation rate
D)Participation rate Although the participation rate is a component of the computation, it is not a method of computing the interest credit. In the annual reset index method, interest, if any, is determined each year by comparing the index value at the end of the contract year with the index value at the start of the contract year. Interest is added to the annuity each year during the term. Using the high-water mark the index-linked interest, if any, is decided by looking at the index value at various points during the term, usually the annual anniversaries of the date the annuity was purchased. The interest is based on the difference between the highest index value and the index value at the start of the term. Interest is added to the annuity at the end of the term. And finally, with the point-to-point method, the index-linked interest, if any, is based on the difference between the index value at the end of the term and the index value at the start of the term. Interest is added to the annuity at the end of the term. In each of these, the insurance company will specify the participation rate (what percentage of the increase will be credited) and a cap rate (the maximum amount to be credited).
An individual is deciding between a flexible premium variable life contract and a scheduled premium variable life contract. If she is concerned about maintaining a minimum death benefit for estate liquidity needs, she should choose: A)the flexible premium policy because the contract's face amount cannot be less than a predetermined percentage of cash value. B)the scheduled premium policy because earnings do not affect the contract's face amount. C)the flexible premium policy because earnings of the contract directly affect the face value of the policy and earnings can never be negative. D)the scheduled premium policy because the contract is issued with a minimum guaranteed face amount.
D)the scheduled premium policy because the contract is issued with a minimum guaranteed face amount. A scheduled premium variable life contract is issued with a guaranteed minimum death benefit. If the individual is concerned about having the minimum guarantee, you should recommend the scheduled contract.