Which insurance policy can be classified as a securities product?

• A. Variable life
• B. Modified life
• C. Universal life
• D. a Modified Endowment Contract

Answer: (A)

Variable life is structured with separate investment accounts chosen by the policyowner. Premiums are allocated to these sub-accounts, and the cash value (as well as the death benefit) can rise or fall based on investment performance. Because the policy’s value depends on market investments and the policyowner bears the investment risk, this type of contract is treated as a security and falls under securities regulation.

The other policies involve guaranteed or fixed components rather than market-based investment risk. Modified life typically has a fixed cash value with guaranteed elements, and universal life offers flexible premiums with interest credited by the insurer, not tied to separate market accounts in the same way. A Modified Endowment Contract is a tax classification for a life policy, not a securities product.