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Life Insurance Policies 30
Separate Accounts vs. General Accounts


MR. WATSON: Will Rogers said he was more concerned with the return of his money than he was the return on his money. Will Rogers was very conservative, but I guess he's still dead, isn't he? Will Rogers was a very conservative investor. He would have not invested into these accounts. Do you agree?

ALL: Um-hmm.

MR. WATSON: He would have purchased Whole life, indeterminate, interest-sensitive, or universal. To protect Will Rogers from guys like me who are very aggressive, the variable products have to be invested in the company's separate account. So if that account goes belly up, people like Will Rogers are protected. So in the past you had John Hancock Mutual Life Insurance Company and John Hancock Variable Life Insurance Company. Two separate companies. If the stock market went to hell in a hand basket, the general account people were protected.

General vs Separate Accounts

WOMAN: You said variable accounts were guaranteed.

MR. WATSON: No, I did not. I said with the variable life policy, the premiums are fixed, and the death benefit could not go below what you initially purchased. Guys, it's a risk/reward type of thing. Y'all with me?

WOMAN: So if the stock market went down, I mean-

MR. WATSON: Crashed.

WOMAN: -- crashed, then what do you have if you have a variable?

MR. WATSON: You have the death benefit. You lost. You only get the death benefit.

MR. WATSON: Separate account and general account. Which one are variable life policies invested into?

MAN: Separate.

MR. WATSON: What about variable universal life?

ALL: Separate.

MR. WATSON: What about variable life?

ALL: Separate.

MR. WATSON: What about universal life?

ALL: General.


ALL: It's not a variable product.

MR. WATSON: Because separate accounts protect non-variable people from the risk of the variable people. Does that make sense?

ALL: Yes.

General vs Separate Accounts

5 Key Terms


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