Florida 2-15 Life, Health and Variable Annuity AgentGeneral Knowledge of Life InsuranceEasy
A client is seeking a life insurance policy that offers a guaranteed death benefit, guaranteed level premiums, and guaranteed cash value growth. They are not interested in investment risk or flexible premiums. Which type of policy would be most appropriate?
- AIndexed Universal Life
- BWhole Life
- CVariable Life
- DUniversal Life
Show answer & explanationAnswer & explanation
Correct answer: B. Whole Life
Whole Life insurance is characterized by its guaranteed death benefit, guaranteed level premiums for life, and guaranteed cash value accumulation. It does not involve investment risk for the policyholder, which aligns with the client's stated preference.
Why the other options are wrong
- A. Indexed Universal Life's cash value growth is tied to an index, introducing market-linked risk, even if with floors/caps.
- C. Variable Life's cash value and death benefit fluctuate based on underlying investments, involving investment risk.
- D. Universal Life has flexible premiums and adjustable death benefits, not guaranteed level premiums.
Whole Life Insurance Characteristics
A type of permanent life insurance that provides a guaranteed death benefit, guaranteed level premiums for the life of the insured, and guaranteed cash value accumulation.
- Guaranteed level death benefit.
- Guaranteed level premiums.
- Guaranteed cash value growth (fixed interest rate).
- No investment risk for the policyholder.
- Policy remains in force for the insured's entire life.
Memory trick: Stable life insurance is like an anchor, fixed and reliable, not swaying with the market.