Question

True/False. In all cases, variable universal life insurance policies link the death benefit directly to investment performance

Answer 1

Variable universal life insurance often shortened to VUL is a type of life insurance that builds a cash value. In a VUL, the cash value can be invested in a wide variety of separate accounts.

Variable universal life is a type of a permanent life insurance, because the death benefit will be paid if the insured dies any time as long as there is sufficient cash value to pay the costs of insurance in the policy.With most if not all VULs, unlike whole life, there is no endowment age(the age at which the cash value equals the death benefit amount, which for whole life is typically 100).This is yet another key advantage of VUL over whole life. With a typical whole life policy, the death benefit is limited to the face amount specified in the policy, and at endowment age, the face amount is all that is paid out.Thus with either death or endowment, the insurance company keeps any value built up over the years.However, some participating whole life policies offer riders which specify that any dividends paid on the policy be used to purchase "paid up additions" to the policy which increase both the cash value and the death benefit over the time.

Hence it is true, that the variable universal life insurance policies link the death benefit directly to the investment performance.