Which statement best describes the minimum guaranteed death benefit (MGDB) in variable life insurance?

Which statement best describes the minimum guaranteed death benefit (MGDB) in variable life insurance?

• A. The initial face amount of a variable life policy guaranteed to be paid to a named beneficiary so long as the scheduled premiums are paid.
• B. The account value at death.
• C. A settlement option guaranteeing lifetime payments.
• D. A provision that surrender value cannot be lost.

Answer: (A)

The main idea is that variable life policies can offer a floor on the death benefit called the minimum guaranteed death benefit. This guarantees that, at death, the beneficiary will receive at least the policy’s original face amount as long as premiums are paid. The cash value in a variable policy fluctuates with investment performance, so it can be higher or lower than the face amount, but the MGDB ensures a minimum payout equal to that initial face amount, provided premiums continue. That’s why the statement describing the MGDB as the initial face amount guaranteed to be paid to a named beneficiary as long as scheduled premiums are paid is correct. The other choices don’t describe this floor: MGDB is not simply the account value at death, not a settlement option for lifetime payments, and it isn’t a guarantee that surrender value can never be lost.

The main idea is that variable life policies can offer a floor on the death benefit called the minimum guaranteed death benefit. This guarantees that, at death, the beneficiary will receive at least the policy’s original face amount as long as premiums are paid. The cash value in a variable policy fluctuates with investment performance, so it can be higher or lower than the face amount, but the MGDB ensures a minimum payout equal to that initial face amount, provided premiums continue. That’s why the statement describing the MGDB as the initial face amount guaranteed to be paid to a named beneficiary as long as scheduled premiums are paid is correct. The other choices don’t describe this floor: MGDB is not simply the account value at death, not a settlement option for lifetime payments, and it isn’t a guarantee that surrender value can never be lost.