Which policy type features cash values tied to separate accounts and allows investment performance to affect the cash value?

• A. Variable Whole Life
• B. Fixed Life
• C. Universal Life
• D. Index Life

Answer: (A)

The key idea is that cash value growth depends on investment performance and is actually tied to separate accounts. In a variable life policy, the cash value is placed into separate accounts that function like investment funds. The policyowner—or the plan—chooses these subaccounts, so how the investments perform directly affects the cash value (and often the death benefit). The cash value isn’t guaranteed; it can go up or down with market results, and investment risk is borne by the policyholder.

This is different from fixed life, where cash values grow at guaranteed rates, or universal life, where cash value grows mainly based on credited interest with more flexible premiums and not tied to separate accounts. Indexed life uses index-based crediting, but not in the same separate-account structure as variable life. So the description best fits variable whole life.