Oklahoma Life Producer Practice Exam

What is the basis of investment in Variable Universal Life insurance?

1. Government bonds exclusively

2. Equity investments

3. Real estate holdings

4. Commodities and precious metals

The correct answer is: Equity investments

Variable Universal Life (VUL) insurance is a type of permanent life insurance that combines a death benefit with an investment component. The investment portion allows policyholders to allocate their premiums among a variety of investment options, which typically include stocks, bonds, or mutual funds. The correct answer, equity investments, reflects this characteristic, as VUL policies are often invested in stock market index funds or other equity-based options. This allows the cash value of the insurance policy to potentially grow over time based on the performance of the underlying investments, which can lead to higher returns than those found in more traditional whole life policies. The ability to choose investments also gives policyholders a level of control over their cash value growth, aligning with their personal risk tolerance and investment strategy. In comparison, options such as government bonds, real estate holdings, or commodities and precious metals do not fully capture the essence of the primary investment mechanisms available in a Variable Universal Life insurance policy, which primarily emphasizes equity investments for growth potential.