Variable life insurance is permanent life insurance that combines death benefits with an investment component. The policyholder can allocate premiums to various investment options, and the cash value and death benefit will fluctuate based on the performance of these investments.
Which type of life insurance combines death benefits with an investment component that fluctuates based on investment performance?
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A) Whole life insurance has a guaranteed death benefit but no investment component. B) Universal life insurance has an investment component, but the cash value and death benefit do not fluctuate based on investment performance. C) Variable life insurance combines death benefits with an investment component that fluctuates based on investment performance. D) Term life insurance covers a specified term with no investment component or cash value.
What is the primary difference between variable life insurance and universal life insurance?
A) Both variable and universal life insurance can have flexible premiums. B) Both variable and universal life insurance can have a guaranteed minimum death benefit. C) Variable life insurance has an investment component that fluctuates based on investment performance, while universal life insurance does not. D) Both variable and universal life insurance provide permanent coverage.
What is the surrender value of a variable life insurance policy?
A) The death benefit is paid to beneficiaries upon the insured's death. B) The amount a policyholder receives if they cancel the policy before death is the surrender value. C) The total premiums the policyholder pays do not necessarily equal the surrender value. D) The amount of the policy's cash value available for loans is not the same as the surrender value.
In the 1980s, variable life insurance gained popularity for policyholders to participate in the stock market's growth while still providing a death benefit. This trend was widely covered in major newspapers, highlighting the potential for higher returns compared to traditional whole-life insurance policies.
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Example Series 65 Example Practice Question
A young professional purchases a variable life insurance policy to provide financial protection for their family. They allocate some of their premiums to a stock fund, hoping to grow the cash value over time. As the stock market performs well, the cash value and death benefit increase, providing additional financial security for their loved ones.
Variable life, a policy so grand, combines death benefits with investments in hand. As markets rise and fall, the cash value will sway, but a guaranteed minimum death benefit will stay.