Texas General Lines — Life, Accident, Health and HMOLife InsuranceMedium
Which of the following is NOT a characteristic of a Universal Life insurance policy?
- AUnbundled components (mortality charges, expenses, interest)
- BFlexible premiums
- CAdjustable death benefit
- DGuaranteed interest rate on cash value
Show answer & explanationAnswer & explanation
Correct answer: D. Guaranteed interest rate on cash value
Universal Life policies offer flexible premiums, adjustable death benefits, and have unbundled components (mortality, expenses, interest). However, they typically provide a current interest rate that can fluctuate, often with a guaranteed *minimum* interest rate, but not a guaranteed *fixed* interest rate on the entire cash value for the life of the policy, unlike traditional Whole Life.
Why the other options are wrong
- A. Universal Life policies are known for their unbundled structure, showing separate charges for mortality, expenses, and interest.
- B. Flexible premiums are a key characteristic of Universal Life.
- C. Adjustable death benefit is a key characteristic of Universal Life.
Universal Life Characteristics
Universal Life insurance is a flexible premium, adjustable death benefit policy with unbundled components, offering a current interest rate that may fluctuate, typically with a guaranteed minimum.
- Flexible premiums.
- Adjustable death benefit.
- Unbundled (transparent) costs.
- Fluctuating interest rate (with minimum guarantee).
Memory trick: Universal: Flexible, Adjustable, Unbundled, but Interest is not always guaranteed.