Question

What is guaranteed if a variable life insurance policyholder allocates cash value to the policy’s fixed account?

I. Principal
II. Interest

1. II only
2. I only
3. Neither I nor II
4. Both I & II

Answer 1

In a variable life insurance policy, when a policyholder allocates cash value to the policy’s fixed account, they typically receive certain guarantees:

I. **Principal** - This means that the money allocated to the fixed account will not decrease and is guaranteed to be returned to the policyholder.

II. **Interest** - The fixed account generally earns a guaranteed minimum interest rate, which provides some level of growth to the funds in the fixed account.

Given these guarantees, the correct answer is:

4. **Both I & II**