Variable Universal Life/Universal Life Plan (VUL/ULP) Practice Exam - Study Guide & Prep

The statement that equity funds typically yield higher returns with higher risk is accurate in the context of investment and insurance products like Variable Universal Life (VUL) and Universal Life Plans (ULP).

Equity funds are investments that primarily consist of stocks, which are known to have greater volatility than many other asset classes, such as bonds or cash equivalents. This volatility means that while there is potential for substantial returns, there is also a higher risk of losses. Historically, equities have outperformed other investments over the long term, leading to the understanding that with higher potential returns comes increased risk. This understanding is a fundamental principle in finance, where the risk-return tradeoff guides investors in making decisions about their portfolios, including the choice of cash values for VUL and ULP policies.

In addition, equity funds are often included in the investment options for policyholders who want to grow their cash value over time, recognizing that they are comfortable with the accompanying level of risk. Understanding this relationship helps individuals make informed choices about their insurance policies and investment strategies.