New Jersey Life and Health State Practice Exam

What feature is held exclusively by variable universal life insurance?

1. Flexible premium payments

2. Death benefit guarantees

3. Policyowner's right to select investments

4. Annual dividend payments

The correct answer is: Policyowner's right to select investments

Variable universal life insurance (VUL) is a unique type of life insurance that combines elements of both whole life insurance and universal life insurance, specifically allowing policyholders more control over their investment options. The feature that is held exclusively by variable universal life insurance is the policyowner's right to select investments. In VUL policies, the cash value can be allocated among various investment options, such as stocks, bonds, mutual funds, or other investment vehicles. This level of control allows policyholders to take advantage of potential growth opportunities in the markets, aligning their investment choices with their personal financial goals and risk tolerance. While flexible premium payments are a characteristic of many types of universal life products, death benefit guarantees can be found in earlier forms of life insurance, and annual dividend payments are typically associated with participating whole life policies. Therefore, the selection of investments is a distinct feature of variable universal life insurance, which sets it apart from other life insurance policies.