The insurance company guarantees the rate of return in a general account, which is typically around 4 - 6% (the same as CD’s). The cash value grows tax-deferred, but does not provide much of a hedge against inflation. The investment risk resides with the insurance company because they have to guarantee a minimum rate of return. The investments are very conservative government controlled fixed return investments, i.e. bonds, mortgages, and real estate. Also, the general account is not creditor proof. Thus, if the insurance company goes under, you can loose the money in the cash value. Although, many states will guarantee the death benefit and perhaps even the cash value up to a certain limit per individual, not per policy. Refer to the associated laws in your state controlled by the Insurance Commissioner.

     The separate account does not have a guaranteed rate of return. The investment risk resides with the individual owning the policy, not the insurance company. The owner can direct the cash value in investments that meets their goals. The separate account is composed of a pool of mutual funds embedded within an insurance policy that offers an aggressive rate of return (even lower rates if desired) that provides a hedge against inflation. It operates similar to a 401(k) program, allowing you to choose your investments, but is dissimilar in that it does not offer any contributions other than your own investment. The cash value is creditor proof, so if the insurance company goes under, you will have full access to the funds you control.


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