Universal life, variable life, and other adjustable products

I.B Interest, market-sensitive, and adjustable life

On the Texas Life producer exam (InsTX-Life01) outline in force on or after 1 September 2026, this topic sits under Types of Policies (15 scored questions). These unofficial notes cover five designs: universal life, variable whole life, variable universal life, interest-sensitive whole life, and indexed life. They share a theme: cash value is not locked to a single guaranteed schedule the way ordinary whole life is. Interest credits, separate-account performance, or an index can change how fast cash value grows. Some designs also let the owner change premium and death benefit after issue.

Variable contracts involve securities, which is a licensing fact rather than a product-performance feature. Selling them generally requires a life license plus a securities registration. That does not make the other products “safer” in every case; it only marks which ones shift investment risk to the owner through a separate account.

I.B.1 Universal life

Universal life unbundles the contract. Each month the insurer takes a cost-of-insurance charge and expenses from the cash-value account and credits interest. The owner may pay a flexible premium above a minimum needed to keep the policy in force. Paying only the minimum for too long, or skipping deposits after a loan, can cause a lapse even if the face amount still looks large on paper.

Two death-benefit options show up constantly. Option A (or 1) is a level death benefit: the net amount at risk shrinks as cash value grows. Option B (or 2) is increasing: the death benefit equals the face amount plus cash value, so the net amount at risk stays closer to the face and monthly charges are higher. Partial withdrawals and policy loans are common features; withdrawals usually reduce the death benefit dollar for dollar under Option A.

I.B.2–3 Variable whole life and variable universal life

Variable whole life keeps a scheduled premium like traditional whole life, but cash value sits in separate-account subaccounts the owner chooses. There is typically a guaranteed minimum death benefit if scheduled premiums are paid, but cash value is not guaranteed. Poor market results can erase cash value even while the minimum death benefit holds.

Variable universal life combines UL flexibility with separate-account investing. Premiums are flexible. Death-benefit options resemble UL. There is usually no guaranteed cash value. A sequence of poor returns plus thin funding is a common lapse path. Prospectus delivery and suitability are part of the sale, not extras.

I.B.4–5 Interest-sensitive whole life and indexed life

Interest-sensitive whole life, sometimes called current-assumption whole life, looks more like traditional whole life on the surface: a scheduled premium and a death benefit. Behind the scenes the insurer credits a current interest rate that can change, and it may adjust the cost of insurance. If current assumptions stay favorable, the policy may vanish premiums or build extra cash value. If assumptions worsen, the owner may have to pay more or accept a lower paid-up benefit. Guarantees still exist, but they are the floor, not the illustration.

Indexed life credits interest using a formula tied to an external index, often with a cap, floor, and participation rate. The owner does not own the index and typically does not take market losses below the floor, which is often zero for the credited rate. Caps and participation rates can change. This is not the same as variable life: there is no separate-account menu, and the credit is an insurer formula, not a share of fund performance.

Sort these five by two axes. Who bears investment risk: the insurer (UL, interest-sensitive, indexed) or the owner through a separate account (variable WL, VUL)? Can the owner change premium and face amount after issue (UL and VUL) or is the premium scheduled (variable WL, interest-sensitive WL)? Indexed products sit with the insurer-credit group. If you can place a fact pattern on those two axes, you can name the product the outline is pointing at.