What are sub-accounts in a VUL policy?

Sub-accounts in a Variable Universal Life (VUL) policy refer to the investment options available within the policy. These sub-accounts function similarly to mutual funds, allowing policyholders to allocate their cash value among a variety of investment choices, which can include stocks, bonds, and other assets. This investment flexibility is a hallmark of VUL policies and allows policyholders to tailor their investment strategy based on their risk tolerance and financial goals.

Choosing how much of the cash value to allocate to each sub-account is crucial, as the performance of these investments can significantly affect the overall cash value and the death benefit of the policy. Policyholders often have the ability to modify their allocations over time, adapting to changing market conditions or personal circumstances.

In contrast, the other answer choices relate to different aspects of life insurance policies. Options for premium discounts are not what sub-accounts are about, while categories of death benefits pertain to the structure of the policy's payout and fixed annuity options involve a different product altogether. Therefore, defining sub-accounts as investment options within the policy accurately captures their role in a VUL.