Which product type requires a securities license to be sold due to its investment component?

• A. Term Life
• B. Whole Life
• C. Variable Life Insurance
• D. Universal Life

Answer: (C)

The investment component in a life product triggers securities regulation. Variable life insurance is designed with a separate investment account that you can allocate into subaccounts (similar to mutual funds). The policy’s cash value and sometimes the death benefit depend on how these investments perform, exposing the policyholder to investment risk. Because of that investment element, selling it requires not only a life insurance license but also a securities license (FINRA), since it is treated as a security.

Other life products don’t involve invested funds in separate accounts. Term life provides pure death benefit protection with no cash value. Whole life offers guaranteed cash value and fixed premiums, with a guaranteed return set by the insurer rather than market investments. Universal life has flexible premiums and cash value, but the credited interest is not tied to market securities in the same way, so it isn’t classified as a security.