What type of life insurance is best for an employer seeking flexibility in investment choices for funding a nonqualified deferred compensation agreement?

The best choice for an employer looking for flexibility in investment choices for funding a nonqualified deferred compensation agreement is variable life insurance. This type of insurance allows policyholders to allocate their premiums among a variety of investment options, such as stocks, bonds, or mutual funds, which can lead to varying cash values and death benefits based on the investment performance.

The inherent flexibility of variable life insurance makes it particularly suitable for nonqualified deferred compensation arrangements since these plans often require a longer-term investment strategy that can adapt to the changing financial landscape. Furthermore, the potential for higher cash value accumulation aligns well with the objectives of funding retirement benefits or supplementary income plans.

Other types of life insurance, such as whole life and universal life, offer more conservative investment components with less variability, which may not provide the same level of growth potential or flexibility. Term life insurance, on the other hand, does not build cash value and is solely designed for coverage, making it unsuitable for investment purposes in the context of deferred compensation. Thus, variable life insurance stands out as the optimal choice for this scenario.