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Finance Dictionary and Glossary of Investment Terms
Life insurance for which the amount of the payments is determined by the performance of the underlying investments chosen by the policyholder. Agents selling such policies must be Registered Representatives of a broker/dealer licensed by the NASD and registered with the SEC. Choices range from low-risk fixed income funds to high-yield stock and bond funds. These accounts are typically accompanied by higher fees. Returns are generally not guaranteed and investment risk is assumed by the policy holder instead of the insurance company. Premiums remain fixed under this arrangement. As would be expected, the better the investments perform, the larger the death benefit will be. However, the death benefit will not drop below a certain minimum, regardless of investment performance.