Final answer:
Policyholders have a choice of mutual-funds in which to invest funds.
Step-by-step explanation:
Within the insurer's separate account, policyholders have a choice of mutual-funds in which to invest funds. A mutual fund is an investment fund that is diversified with assets like stocks and bonds and is managed by professionals or brokers. Investing in mutual funds allows policyholders to spread their risk across different investments and potentially earn higher returns.