T1-L2-P28

Universal and Variable Life - Differences

A major difference between Universal Life and Variable Life, is that the reserves in Universal Life contracts, are held in the company's general accounts, therefore, their growth will depend on the company's overall investment success.

In Variable Life, the owner has chosen to invest the cash value and current premium among the various funds, called separate accounts. The accumulation rate of the cash value is totally dependent on the success of the separate accounts that the owner has chosen.

Another distinguishing feature of Variable Life, as opposed to Universal Life is its dual regulation. Variable life is considered an insurance product by the various states and is so regulated. The Security Exchange Commission classifies Variable Life as a security because of its separate accounts, (similar to mutual funds).

Therefore anyone who is going to sell Variable Life, must be a "Registered Representative" (there are several levels) through the Financial INdustry Regulatory Authority (FINRA), otherwise they will have no product to sell.

Since Variable Life is a security, there must also be specific" full and fair disclosure" just as is required for any mutual fund. The required information is disclosed in the prospectus. One cannot make a presentation of a Variable Life product without a copy of the product prospectus for the potential buyer.