What Kinds of Investment Funds are Offered Inside Variable Life Insurance Policies?

For the more aggressive or knowledgeable investor, many companies now offer GNMA accounts, real estate accounts, and zero coupon bond accounts. Some specialized accounts such as small capitalization stock accounts, market index accounts, and accounts that focus on specific sectors of the economy or industries (i.e., medical, high tech, gold, leisure, and utilities) are also available. In more recent years, Exchange-Traded Funds (ETFs) based on broad stock indexes and other ETFs based on industry sectors, and even less-broadly-diversify portfolios have become popular with investors.

Some companies offer a managed accounts option where the company’s investment manager assumes the responsibility for apportioning investments among the various alternative accounts. Some VL policies also offer a guaranteed interest option similar to the declared interest rate on universal life policies. Recently, some insurance companies have offered investments in hedge fund accounts for policyowners who meet certain income and net worth requirements. Hedge funds are investment companies that are generally unregulated by the SEC; hedge funds may use high risk techniques, such as borrowing and short selling, to make higher returns for their investors.

One of the more popular trends has been the target age fund accounts that are portfolios designed and managed to have asset allocations appropriate to various investment horizons ranging from five to thirty, or more, years

Reproduced with permission.  Copyright The National Underwriter Co. Division of ALM

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