NASAA Series 65, Uniform Investment Adviser Law ExaminationInvestment Vehicle CharacteristicsMedium
A financial advisor is discussing estate planning with a client who wants to ensure that a specific amount of money is available to their beneficiaries upon their death, regardless of when that occurs. The client prioritizes a guaranteed death benefit and a cash value that grows at a guaranteed rate, without exposure to market fluctuations. Which life insurance policy would be most suitable?
- AWhole Life Insurance
- BVariable Life Insurance
- CUniversal Life Insurance
- DTerm Life Insurance
Show answer & explanationAnswer & explanation
Correct answer: A. Whole Life Insurance
Whole life insurance provides a guaranteed death benefit and a cash value that grows at a guaranteed rate, without market exposure, making it ideal for the client's estate planning needs.
Why the other options are wrong
- B. Variable life insurance's cash value is subject to market fluctuations, which contradicts the client's desire for guaranteed growth without market exposure.
- C. Universal life insurance offers flexible premiums and an adjustable death benefit, but its cash value growth rate is often tied to an interest rate, not always fully guaranteed against market fluctuations in the same way as whole life.
- D. Term life insurance provides a death benefit for a specific period only and has no cash value component.
Whole Life Insurance
A type of permanent life insurance that provides a guaranteed death benefit for the insured's entire life and a cash value component that grows at a guaranteed rate.
- Guaranteed death benefit for life
- Guaranteed cash value growth rate
- Level premiums for the entire policy duration
Memory trick: Whole Life: Whole lot of guarantees for your Whole life.